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Newsom-Linked Non-Profit SF Connect Twice As Inefficient As National Average 

Sixty-two percent of budget spent on overhead in 2006

Wednesday, Jan 16 2008

San Francisco spends a small nation's budget on and around the problem of homelessness. Numerous programs sprawl over multiple bureaucracies, each with differing missions, and different levels of coordination and effectiveness.

San Francisco's Human Services Agency, which oversees public assistance programs for the poor, has a 2007-2008 fiscal-year budget of $814 million. The Department of Public Health, whose programs include indigent health care, substance-abuse treatment, street outreach teams, and other programs targeting the needy, will spend $1.3 billion this fiscal year. Public housing, in essence an antihomelessness program, is funded with federal and local money, with $215 million coming this year from San Francisco's city budget, and the mayor proposing to spend another $700 million rehabbing buildings. More cash goes to pay paramedics and police who respond to the significant portion of calls caused by chronic substance abuse and life on the streets. Additional staff are associated with Care Not Cash, the Homelessness 10-Year-Plan Council, the Mayor's Interagency Homeless Cabinet, Homeless Connect, Communities of Opportunity, the Office of the Vice Mayor on Homelessness, and other once-hyped, long-forgotten, still-lingering initiatives that make the city's total homelessness expenditures the subject of boxes' worth of accounting ledger paper.

But for all the money spent, visitors to San Francisco can't help noticing indigents begging on Market St., hollering nonsense on Sixth St., camping under freeways, getting high in empty lots, sleeping in doorways and parks and on benches and curbs, and otherwise living lives bereft of dignity and comfort.

So it made a certain kind of sense when Mayor Gavin Newsom's office announced a staff shakeup January 4 that included appointing new homelessness czar Dariush Kayhan. According to a press release, Kayhan will "direct the city's homelessness policy by coordinating with multiple city departments."

What didn't make sense, however, was that the man assigned this gargantuan task was until last week the director of a Newsom-linked nonprofit, SF Connect, that during its short existence appeared to suffer from the same set of maladies that make our city's homelessness bureaucracies an opaque, ineffective mess. Kayhan ran a corporation that has been operating unlawfully since August, and whose public filings suggest it did an ineffective job providing services to the poor. The nonprofit is currently reassessing "its priorities and goals," according to former Newsom campaign manager Alex Tourk, who has stepped in to oversee it. He would not explain, however, why such reassessment was necessary.

SF Connect Inc. was founded in early 2006 as a nonprofit agency designed to recruit private donors to broaden Newsom's city government Homeless Connect program, which helped volunteers bring services to the poor and homeless.

The agency was launched a year before the mayor's re-election campaign, and seemed to help revive public interest in his signature issue. Newsom personally encouraged wealthy individuals and foundations to donate money in $10,000 and $25,000 chunks. His then–deputy chief of staff, Tourk, was tagged to help launch the project. SF Connect hired Kayhan as executive director because he had previously overseen housing and homelessness programs in the city's Human Services Agency. By year's end, SF Connect had raised $803,939 with an eye toward creating a local version of the first President Bush's "thousand points of light."

SF Connect would extend Newsom's Homeless Connect program, whereby city employees ran periodic service fairs at Bill Graham Civic Auditorium to leverage philanthropic donations and build volunteer spirit. SF Connect planned to expand this concept by attracting volunteers to improve the environment, help poor people be more tech-savvy, and provide aid to families with children.

"We're saying give us your time, give us your passion," Newsom said of SF Connect in August 2006. "Give us your unique quality of imagination. Give us your skill set — give someone else some hope."

Volunteers recruited by SF Connect doubtless helped provide indigent people with hope. But the nonprofit's public filings suggest that its former director did not deliver performances that might inspire hope about the future of city services.

SF Connect's accounting record shows that its ability to channel donor money into services bordered on gross inefficiency, as measured by guidelines published by nonprofit watchdog Charity Navigator.

On its 2006 IRS Form 990, a public information form designed to help potential donors evaluate charities' effectiveness, SF Connect reported that it spent a total of $508,099. Only $191,270 of that went toward program services: The rest was spent on fund-raising and management expenses, meaning SF Connect spent less than 38 percent of its donations on its core activity of running service fairs for the poor.

I spoke to a staffer at Charity Navigator in Washington, D.C., who directed me to a section of its Web site that reads: "Our data shows that 7 out of 10 charities we've evaluated spend at least 75 percent of their budget on the programs and services they exist to provide. And 9 out of 10 spend at least 65 percent. We believe that those spending less than a third of their budget on program expenses are simply not living up to their missions. Charities demonstrating such gross inefficiency receive zero points for their overall organizational efficiency score."

Notwithstanding Charity Navigator's unwavering tone, public filings don't tell the entire story. And experts say it's possible that an organization like SF Connect could look lousy on paper, yet actually perform important work.

Some in the field of nonprofit management consider the IRS Form 990 potentially misleading because some groups knowingly skew their accounting ledgers to make themselves look efficient, and thus attractive to donors.

Carol Silverman, research director of the Institute for Nonprofit Management at the University of San Francisco, wrote in an e-mail that "nonprofits who depend on individual donors (foundations pay much less attention to this) play with how they allocate expenses."

Nora Silver, director of the Center for Nonprofit and Public Leadership at UC Berkeley's Haas School of Business, added that public filings tell only part of the story of any nonprofit's performance. She said the unusually small proportion of SF Connect's budget spent on its programs raises a red flag, but doesn't preclude the possibility the charity did good work.

"This is out of synch with other nonprofits," she said. "You can say that, but it doesn't tell you the whole story. The whole story is not about a profit model; it's about impact. It's about what services were delivered."

There are reasons other than incompetence that a nonprofit director might spend an unusually large portion of the budget on management and operating expenses, particularly during a startup year. For example, SF Connect paid one-time costs of $50,000 to the Volunteer Center, which provides help to nonprofits "with their startup, when they were getting organized," said Jill Blackburn, the center's consulting and training manager.

On the other hand, SF Connect had advantages that could have made Kayhan look like a more effective manager than he actually was. Whereas other nonprofit directors might have to hold frequent and possibly expensive fund-raisers, Kayhan had Newsom to work the phones to solicit wealthy donors, the mayor's Ethics Commission filings show. And SF Connect had Tourk to get the organization off the ground.

The limited scope and usefulness of nonprofits' public filings make the issue of transparency critical for evaluating executive directors' effectiveness. Yet SF Connect seems to have a tortured relationship with the issues of transparency and accountability.The nonprofit obtained multiple extensions to delay the filing of its IRS Form 990. As a result, information about its 2006 activities was unavailable until mid-November 2007, six months after the original deadline.

SF Connect also failed to provide a list of its officers to the California Franchise Tax Board, as required by law. As a result, last August the state suspended its registry, meaning the nonprofit has "lost all rights and powers as a California corporation," a spokesman for the California Secretary of State told me. SF Connect's corporate registry was still suspended as of late last week. This means contracts it entered into can be voided. Additionally, corporations that continue to conduct business during suspension can be subject to state fines.

Not long after the launch of SF Connect, Chronicle City Hall reporter Cecilia Vega caused a kerfuffle in the Newsom camp by asking the mayor to make good on an earlier promise to provide the names of donors to the nonprofit. Kayhan at first blew her off, but later relented. "This is a unique, innovative organization, and we're doing everything we can that's humanly possible to make it as transparent as can be," she quoted him as saying.

That statement seemed a promising portent for asking Kayhan about SF Connect. I asked him if it might be winding down its operations now that he is leaving. "It's definitely not bankrupt," he said, without elaborating.

I asked what his planned budget for 2008 was. He said he didn't recall. I asked what his 2007 budget had been. He said he didn't remember that, either, and that I should speak with Alex Tourk.

Tourk, the husband of Ruby Rippey-Tourk, with whom Newsom admitted in early 2007 to having had an affair, has rejoined SF Connect. He also recently signed on as manager of former state Senator Jackie Speier's campaign for Congress, raising the question of whether running SF Connect is a full-time job.

Tourk sent me a brief e-mail after I'd called requesting an interview. "Since Dar Kayhan's departure as Executive Director, I was asked to join the Board of Directors (on a pro bono basis) of SF Connect and help with its transition as we reassess our priorities and goals for 2008," he wrote.

I again asked Tourk if I could speak with him, but I didn't hear back. And SF Connect board member Lisa Stevens refused, through an assistant, to discuss the organization's fortunes after I sent her a list of questions.

Helpfully, Charity Navigator has advice for situations like these. "Your attempt to communicate with the charity can reveal a lot about the organization," its guidelines for nonprofits state. "It's a big red flag when an organization refuses to answer your questions or to provide financial data at your request."

It's also a big red flag when a mayor attempts to couch himself as a reformer of his city's troubled antihomelessness programs, and then gives every appearance of treating his homelessness bureaucracy as a multibillion-dollar patronage republic.

About The Author

Matt Smith


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