City report blasts SF Pride
by Seth Hemmelgarn
A blistering assessment of San Francisco's LGBT Pride Celebration Committee emerged from the city controller's office this week, showing that the organization's board failed to act in a "timely" manner as a debt of $225,000 mounted, and that it now has "inadequate" operating reserves.
"Despite substantial negative balances on profit and loss statements as well as repeated treasurer's report statements on tight cash flow, board members did not recognize the financial problems of the organization and therefore did not take timely action," the office of Controller Ben Rosenfield said in a report released Tuesday, December 21. The report came in the form of a seven-page memorandum.
Among other things, the controller's office recommends that Pride repay its debt and rebuild reserves; Pride's board should be responsible for meeting yearly fundraising goals and get training to gain better financial oversight skills; improve its policy documentation; and rebuild senior management.
The controller's office said Pride "supports many of these recommendations and is already implementing several of them." Pride's general counsel agreed with that in an interview Tuesday with the Bay Area Reporter.
However, Brooke Oliver, Pride's general counsel, spent several minutes in a phone interview criticizing the B.A.R. 's coverage of the organization over the last several months. She referred to the paper's stories as "almost defamatory."
But she acknowledged that board members "made some mistakes."
"Spending got out of control this year, the fundraising that they hoped for didn't come through, and they got upside down. But now their eyes are fully open. The board is on top of this," Oliver said.
She said 2011 "is going to be a great Pride."
Oliver said she didn't know when the deficit would be eliminated, but it "won't be made worse."
"Pride is working effectively in the community and with its advisers to develop a plan that will get that deficit repaid and rebuild its reserves," she said.
Board Chair Nikki Calma said she is "glad" the report is "done and out."
"Nothing in the report is new," Calma said in an e-mail Wednesday. "It shows where SF Pride is as an organization. We are glad that the controller's report establishes that there has been no wrongdoing. The SF Pride board recognizes what could have been done better, what could have been done differently."
She added that the board is "diligently working on implementing the controller's recommendations now, and setting priorities for that organizational development."
Out gay Supervisors Bevan Dufty and David Campos had requested the controller's assessment in October, after former Pride Executive Director Amy Andre and board President Mikayla Connell announced their resignations.
Their departures followed a "misunderstanding" that saw several of Pride's 2010 beverage partners receive payments that were thousands of dollars less than they had expected. Pride has pledged to make up those payments.
The controller's assessment says Pride "lacks adequate documentation on and dissemination of policies and procedures" relating to external partners such as beverage partners and recommends Pride make its contracts more specific.
The organization owed almost $50,000 to beverage partners, but Calma said last week that additional payments still have not been made.
The controller's office said Pride's $225,000 deficit includes $53,000 owed to the city's public works department. The organization closed its 2009-10 fiscal year with a negative balance of about $380,000 and used $155,000 it had in reserves to cover the shortfall.
The report states that Pride's $380,000 negative balance represents 24 percent of additional expenses above fiscal year 2009-10 revenue. The assessment stated that compared to fiscal year 2008-09, Pride spent an additional $42,600 on operating expenses, $126,000 in event costs, and $204,500 on personnel.
As previously reported, Pride has temporarily furloughed paid staff and is receiving help from an anonymous donor. The controller's office said that Pride recently received $45,000 from a donor and a pledge of a $55,000 bridge loan.
Oliver identified the donor as the Dorian Fund. That could not be confirmed with the fund Tuesday.
She indicated that as of the December general membership meeting, her understanding was that $75,000 had come in through exhibitors so far for the 2011 event. Calma confirmed that, and added that another $3,775 had come in.
The controller's office found that at a November 3, 2009 meeting, the board approved a proposed budget exceeding its $1.8 million income by 19 percent.
"Board meeting minutes reflect that board members questioned the negative year-end balance [of $345,000]," but Andre – who had only started at the organization the month before – suggested that they might balance the budget through "either additional income or cash reserves...," the report stated.
The report also says that two board members had been paid for "professional service" on Pride's behalf, "contrary to agreements signed by board members." The report does not identify the board members and noted the payments were not illegal. However, they were not allowed under Pride's board agreement and code of conduct.
According to the controller's office, Pride officials told them that the board members had received payments "of no more than $2,500 each."
When other board members found out, the report says, both people were asked to either return the money to Pride or resign from the board. The report says one member resigned and the other is "repaying the organization through in-kind services."
The lack of fundraising by the board was also noted in the report.
Pride board members and the executive director didn't fundraise for the organization "until very recently," the report says, but "the board's current fiscal plan" to repay the debt "has begun to prioritize fundraising."
The city's Grants for the Arts office awarded $58,400 to Pride this year.
In a phone interview Tuesday, Deputy Controller Monique Zmuda referred to the Grants for the Arts funding as "a very small amount," but she said, "to the extent [Pride] continues to be a contractor," the controller's office can follow up on the recommendations.
Asked about the possibility of punitive actions, Zmuda said, "There has not been any misappropriation of funds or any wrongdoing," and most of the findings involve fiscal oversight and governance issues "that are common in other nonprofits, as well."
Zmuda indicated punitive measures weren't likely, but she said, "We will follow up on some of the recommendations to see whether or not they're implementing them." She said the controller's office generally takes another look after six months.
She also said fiscal oversight and governance "are two common areas where improvements could be made" at nonprofits the controller's office has reviewed, but she said, "I wouldn't say [the issues found at Pride are] less serious or more serious."
Dufty and Campos appeared relieved Tuesday that at least Pride's situation is now more clear. The two had offered Pride help in fundraising and looking for a new executive director after Connell and Andre announced their resignations.
"I needed to have an outside assessment before taking sponsorships from people," Dufty told the B.A.R. Tuesday, explaining he wanted to be "honest and upfront" with potential sponsors. He said he's now "comfortable," since the assessment lays out "what the parameters of the situation are."
"Even though the news is more dire than I would hope, I remain confident that we can secure the financial support and get on track for 2011," said Dufty.
He said, "the number one thing" is for the board – which currently has only five members out of a possible 15 – to expand and make "a serious commitment to fundraising."
Dufty didn't know whether there are any firm commitments from sponsors yet, but he said he's been "meeting with potential sponsors every day."
Campos said, "I think the extent of the problem was a little bit bigger than we expected," but "I don't think the problems are insurmountable."
The controller's review is based on select financial and compliance documents as well as qualitative interviews with "key" Pride personnel, including Andre, Calma, and Oliver.