From the moment it was announced as the theme for this year's San Francisco LGBT Pride Parade and celebration, "In Pride We Trust" sounded like a slogan looking for trouble.
Problems had already started to emerge for the LGBT Pride Celebration Committee. Some community partners complained that they had been shortchanged for their work on the 2010 festival. At the annual general membership meeting last September, then-board President Mikayla Connell announced the organization faced a deficit of about $99,000.
About a month later, both Connell and Executive Director Amy Andre announced their resignations. In December, the city controller's office revealed that Pride's debt was $225,000. (Interim Executive Director Brendan Behan said last week that's down to $116,000.)
But Pride isn't the only LGBT-related nonprofit that's had a rough time since last year's celebration drew hundreds of thousands of people to the city. Clients receiving help through local agencies for everything from medical care to housing are experiencing some anxious times.
Two examples stand out.
In late January, the board of Lyon-Martin Health Services, which serves women and transgender people, made the surprise announcement that the clinic serving almost 2,500 patients was more than $500,000 in debt and would have to close in days. The clinic remains open but continues to struggle.
As of May, Academy of Friends, which is known for its pricey Academy Awards galas, owed more than $100,000 to support the 11 HIV and AIDS-related nonprofits that had helped them with last year's party. But late last month, AOF reportedly told its partners they wouldn't be getting their money. The organization's future isn't clear.
The San Francisco LGBT Community Center has seen financial challenges of its own in the last decade, including having to go to the city for a $157,000 loan last year. But Executive Director Rebecca Rolfe said she anticipates it would finish its fiscal year "in the black" this year. In 2003 the center had to retool after its initial operating plan failed to generate the expected revenue. When it opened in 2002, the center lost $642,000 in six months. Rolfe, who took over as executive director in 2007, has continued to steady the center's finances.
Rolfe said limited city, state, and federal funds are among the challenges that local nonprofits face, and that "appears to be something that will be true for a long time to come."
However, she said "on average" the city's LGBT nonprofits are "extremely trustworthy."
(Photo: Rick Gerharter)
"There are a lot of checks and balances in place to assure people their dollars are being spent in the right ways," Rolfe said. She encourages people to "hold the nonprofits accountable, and to ask questions, but I think the vast majority of our nonprofits are extremely efficient and extremely effective at what we do."
Aside from government funding cuts, individual donations and other revenue sources have decreased in recent years. The recession was especially rough from 2008 to 2009 and the recovery has been sluggish.
The Bay Area Reporter recently analyzed the 2005 and 2009 tax filings for 20 LGBT-related nonprofits based in San Francisco. Not all the agencies' fiscal years covered the same time spans. Most of the documents reflect the periods beginning in 2005 and ending in 2006, and 2009 to 2010. The 2009 filings are the latest available for most of the organizations.
The documents, which are known as 990 forms, are just one way to gauge organizations' financial health. The data the B.A.R. reviewed indicate some problems, but seem to show that most of the city's gay nonprofits are being run efficiently. The data indicate that from the filings beginning in 2005 to those starting in 2009, combined revenue for the agencies went from about $63 million to almost $68 million. Despite that apparent increase, it's hard to tell what the data would look like if it weren't for the recession.
Some nonprofits' clients have seen the impact of the recession and are concerned about what it could mean for them.
Tenderloin Health
The 2005 and 2009 990 tax filings for Tenderloin Health, which provides housing services to poor San Franciscans who are the most at risk for HIV/AIDS, show that the agency's net assets went from about $1.1 million for 2005 to negative $182,951 for 2009.
David Fernandez, who became the nonprofit's executive director in November 2009, said he couldn't explain the drop. The reasons weren't immediately clear from the most recent 990 filing. He said someone who could answer questions about the figure was involved in the agency's strategic planning meeting, which Fernandez was on a break from when he spoke with the B.A.R. on Monday, June 20.
He expressed confidence the nonprofit would survive. "We are struggling through it, but we're definitely not in any danger" of closing right now, Fernandez said.
"We're going on a pretty heavy fundraising campaign," and the agency has just hired Pamela Fitzgerald as its new development director, he said.
"We're going after a lot more unrestricted funds to be able to take care of some of the things I inherited" when he became the agency's director, Fernandez said.
He said in their strategic planning meetings, Tenderloin Health's leadership team was discussing "where we are today," where they need to be, and where there are gaps to fill. He said they're "trying to look out three years" and determine what fundraising goals they need to reach in order to maintain and build on programs.
The agency is hoping not to make cuts, he said, but there's uncertainty over some HIV and AIDS-related funding. He said they think they can handle whatever the reductions are by reorganizing, which they've already done with the housing program. There, they generally have one manager per site, he said, but they've developed a process for having a manager across sites.
Fernandez said his current annual compensation is about $140,000. Asked if a pay cut might help his agency's situation, Fernandez said, "We've talked about that, from my position all the way down, if necessary." He said he thinks the agency's budget is about $7.1 million.
Indirect expenses
By one measure, at least, Tenderloin Health appears to be all right.
One way to gauge the efficiency of an agency is to look at the proportion of expenses allotted for program services versus management, fundraising, and general costs. Together, the latter are typically known as indirect expenses. Nonprofits aim for a benchmark of 20 to 25 percent or less, according to nonprofit experts.
Bill Ambrunn, a local attorney with experience in nonprofit management, said the figure is "a measure of efficiency," and "generally, if it goes over 20 percent, it really raises a red flag." He emphasized he wasn't commenting on specific agencies.
Sandra Miniutti, of Charity Navigator, which rates nonprofits, said a 25/75 split is "a good benchmark," referring to indirect expenses versus direct expenses.
For Tenderloin Health, the percentage of expenses that goes toward indirect costs was 11 percent for 2009.
"We're definitely trying to keep expenses as low as we can," said Fernandez.
Under One Roof appears to be a different story. For 2009, the shop, which returns its net proceeds to numerous HIV/AIDS service organizations but has been struggling in recent years, has an indirect percentage of 45.
The shop recently distributed a total of $10,000 to its 23 AIDS service organization partners, but that's considerably less than what it used to dole out.
Executive Director Beth Feingold has acknowledged times have been tough for the agency, and admitted the 45 percent figure is "very high." However, she said in a recent interview that Under One Roof would shut down "over my dead body." She added, "We're really strong and stable right now, all I need now is retail sales."
The shop is saddled with a rent of $16,000 a month, though Feingold said a board member generally pays $5,000 of that.
Asked whether shoppers realized how much money goes toward the nonprofit's indirect expenses, Feingold said, "It's not one of the questions people tend to ask us."
She said she'd like to be able to say she was spending "10 cents out of a dollar on fixed overhead," but the space "was taken over during a go-go economy, and now we know it was a house of cards." She said she continues to try to improve the figure.
At least one person visiting the shop last week seemed unconcerned with Under One Roof's administration and fundraising costs. A woman who identified herself only as Caroline said, "As long as it's 50/50, it sounds okay." She added it's "a good cause" and the shop has "wonderful things."
One of the city's largest nonprofits, and the largest HIV/AIDS service organization, is the San Francisco AIDS Foundation, which works to stop the spread of HIV and, among other programs, operates the gay health center Magnet. Like Under One Roof, SFAF also put a higher proportion of its expenses toward indirect costs than many other nonprofits the B.A.R. examined. For the 2009 filing, those costs were at about 35 percent.
Jon Zimman, SFAF's chief financial officer, said the 35 percent figure is correct, but he questioned using 20 percent to 25 percent as a benchmark for efficiency, and he said he wasn't familiar with that indicator.
"Every organization is different," he said. "It depends on the nature of the services one is providing, and the environment in which they're being provided," he added, referring to the costs of doing business in "one of the most expensive urban centers in the country."
When the B.A.R. explained that the other agencies being examined were also based in San Francisco, and most of their indirect expense proportions were lower, Zimman said, "I can't comment on other agencies without actually looking at their numbers. ... There are a variety of ways of measuring the efficiency of a nonprofit, and the challenge is comparing apples to oranges."
From 2008 to 2010, the nonprofit's funds from sources including individual contributions and foundations declined. SFAF reduced expenses from $21.4 million in fiscal year 2008-09 to $19 million in FY 2009-10, and it has moved its headquarters to a cheaper space. SFAF's FY 2011-12 budget is $23.6 million.
Zimman said they expected revenue for 2010-11 would be at least as good as, "if not a little better, than last year." He also said, as a result of additional contracts from the city, they increased program services in 2010-11, such as more testing at Magnet.
John Brown, 45, is a client living with AIDS who's involved with Black Brothers Esteem, one of SFAF's programs. He said the group has "totally changed my life." He said it's given him a place to talk to other black men about issues including relationships and HIV and AIDS. He's also been able to go into the community and advocate to other black men and women, he said.
He said the program's "trying to stay strong," but "you hear about other agencies closing their doors, and it just kind of makes you wonder. It's scary."
Told about Brown's remarks, Zimman said, "The foundation is doing everything we can to maintain our current level of programs and services and, where possible, to increase the services that we provide." He said the agency has "no current plans" to curtail Black Brothers Esteem "or any other programs that we're currently operating."
In the past few years SFAF's housing subsidy program and mental health services with the Stonewall Project have seen reductions, according to controller Chris Damon.
Administrators' compensation at most of the agencies that the B.A.R. reviewed has risen, and SFAF is no exception. Total CEO compensation there was about $186,000 for 2005. Current CEO Neil Giuliano's salary is $249,000. That's one of the highest amounts for any of the people in the B.A.R.'s data.
Asked about the figure, Zimman explained the CEO's compensation is "a board decision" that takes into account what "similarly situated" CEOs at other Bay Area nonprofits are paid.
In at least one way, SFAF is more forthcoming than many of the other agencies the B.A.R. examined. Few of the other nonprofits provide nearly as much financial information on their website as the AIDS foundation does.
Other agencies
St. James Infirmary, which offers medical and social services for sex workers, has seen problems, too, and not all of them directly relate to the economy. In recent years, it has had a fire, and it has been burglarized. The agency also had to buy new computers after a virus wiped out its old ones.
Executive Director Naomi Akers said funding from sources, including the city, has been dropping. She indicated that in 2009 she had to go for three months without pay. She said her compensation is $70,000, which appears to make her one of the lowest-compensated nonprofit directors the B.A.R. studied.
Funding problems have come at an especially bad time.
"Last year, we saw twice as many new people as we did the year before that," Akers said. She said increased demand includes clients participating in the food program.
Craigslist provided a total of $250,000 to support St. James, and she hopes that money will get them through the end of the year. No one from the company responded to an interview request made through their website.
Akers said St. James probably isn't in danger of closing, but it might have to cut a day of operation.
For her agency, the percentage of expenses going toward indirect costs for 2009 was about 33 percent. Asked about the figure, she said, "We're not a top heavy organization with a bloated management overhead."
After the interview, Akers sent an email to the B.A.R. saying, "I think I just need to work more closely with our accountant to see if we can get [the indirect expense amount] down ... . And there is no way we spend 33 percent of our money on indirect" costs.
Asian and Pacific Islander Wellness Center has also seen problems in recent years.
In January 2010, the agency ceased its operations in Oakland and Daly City. At the time, Executive Director Lance Toma cited decreases in funding and said the decisions were related to ensuring "that we can continue our services in San Francisco."
In a recent interview, Toma said, "I think we're doing well, considering the challenges both in San Francisco and at the national level. I think we're also doing some really bold and innovative things." Earlier this year, the agency opened a free medical clinic.
Toma said the nonprofit's board and staff have focused on development, with "a very intentional outreach to individual donors" and developing their annual major donor campaign.
That's "really resulted in consistent and increased giving over time, even despite the rough economy," he said.
Mark Agtane, 44, who's living with HIV, is an API Wellness Center client. He's also on the consumer advocacy board.
He said he thinks about the nonprofit's finances "a lot" and he worries about cuts. However, he said he has to give the people running the agency a chance "to prove they're capable" of doing their work, especially the board of directors.
Toma said, for now, the main cut it appeared his agency would need to make is related to Asian and Pacific Islander/gay and bi men programming. That's due to a lack of funding he expects from the city.
Troy Brunet, the incoming president of the Castro Lions and a fundraiser for local groups, believes fundraising is rebounding this year.
"It is getting better to raise money," said Brunet, a Tenderloin Health board member for the past five years. "People are getting aware again of community needs and are not solely focused on their own personal expenses. That is a real good thing."
Matthew S. Bajko contributed to this report.