HomeMy WebLinkAboutStaff Report 10510
CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR
September 10, 2019
The Honorable City Council
Palo Alto, California
Staff Recommends the Policy and Services Committee Recommend
the City Council Accept the Nonprofit Service Agreements Audit
In accordance with the Fiscal Year 2019 Annual Audit Work Plan, the Office of the City Auditor
has completed the Nonprofit Service Agreements audit. The audit report presents one finding
and four recommendations. The Office of the City Auditor recommends that the Policy and
Services Committee review and recommend to the City Council acceptance of the Nonprofit
Service Agreements audit.
Respectfully submitted,
Don Rhoads, CPA
Special Advisor to the Office of the City Auditor
Management Partners
ATTACHMENTS:
• Attachment A: Audit of Nonprofit Service Agreements (PDF)
Department Head: Don Rhoads, Special Advisor to the Office of the City Auditor
Page 2
Audit of Nonprofit Service Agreements
August 29, 2019
Office of the City Auditor
Don Rhoads, Special Advisor for the Office of the City Auditor, Management Partners
Yuki Matsuura, Performance Auditor I
Attachment A
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Attachment A
Office of the City Auditor ● 250 Hamilton Avenue, 7th Floor ● Palo Alto, CA 94301 ● 650.329.2667 Copies of the full report are available on the Office of the City Auditor website at: http://www.cityofpaloalto.org/gov/depts/aud/reports/performance/default.asp
OFFICE OF THE CITY AUDITOR
EXECUTIVE SUMMARY
Audit of Nonprofit Service Agreements
August 29, 2019
PURPOSE OF THE AUDIT
The purpose of this audit was to:
1) Determine if the City's agreements with nonprofit organizations clearly state the outcomes the City
expects from the funding it provides.
2) Determine if City departments monitor their nonprofit service agreements to ensure that the required
services are performed. In instances where expected outcomes are clearly stated in the agreements,
determine if City departments monitor the progress to ensure that the expected outcomes are achieved.
REPORT HIGHLIGHTS
Finding: The Office of
Human Services
effectively monitors
contractor performance
using an established
process and tools, which
can help other City
departments better
administer their
nonprofit service
agreements (Page 7)
The Office of Human Services, which oversees more than half of the City’s
nonprofit service agreements, has continuously improved its monitoring process
and tools, and built certain requirements into the agreements to hold the
contractors accountable for their performance. Some other departments we
reviewed did not have such an established process or tools, resulting in
undetected errors and noncompliance especially when there was staff turnover.
The City can improve its oversight of nonprofit services agreements by adopting
and making Human Services’ monitoring process and tools available to other
departments.
• Human Services’ contract templates help ensure that expected outcomes and
required services are clearly stated in the agreement and closely monitored.
• The City did not adjust Palo Alto Downtown Business and Professional
Association’s Business Improvement District (BID) budget to reflect declining
BID assessment revenues, resulting in a negative BID Fund balance of $32,000
in FY 2018.
• The City did not ensure Palo Alto Transportation Management Association’s
compliance with reporting requirements but has since strengthened its
oversight.
• The City has multiple agreements with Downtown Streets Team, requiring
improved coordination among City departments to monitor overlapping scope
of services.
Key Recommendations to the City Manager:
• Create a citywide template for nonprofit service agreements, and make it
available to all City departments. The template should ensure that the City’s
payments are tied to contractor performance.
Attachment A
• Renew the 2004 agreement with the Palo Alto Downtown Business and
Professional Association.
• Establish a procedure or desk manual to clarify roles and responsibilities for
monitoring the BID Fund records in SAP, Palo Alto Downtown Business and
Professional Association’s financial records, and MuniServices’ assessment
collection data to ensure that accurate and complete financial data are
provided to the City Council for informed budget and funding decisions.
• Establish an overall monitoring method to ensure that nonprofit
organizations with multiple agreements with the City are reviewed by all
responsible departments to avoid redundancy while clarifying the goals,
objectives, and performance measures to be tracked under each agreement.
Attachment A
TABLE OF CONTENTS
Objective ................................................................................................................................................. 1
Background ............................................................................................................................................. 1
Scope ...................................................................................................................................................... 5
Methodology .......................................................................................................................................... 5
Finding:
The Office of Human Services effectively monitors contractor performance using an established
process and tools, which can help other City departments better administer their nonprofit
service agreements ........................................................................................................................... 7
Recommendations ........................................................................................................................... 20
Appendix 1: The City’s Nonprofit Service Agreements for FY 2018 .................................................... 22
Appendix 2: The DST’s Cleaning and Maintenance Schedule in the Agreement ................................ 27
Appendix 3: City Manager’s Response ................................................................................................ 30
ABBREVIATIONS
BID Palo Alto Downtown Business Improvement District
CAFR Comprehensive Annual Financial Report
CDBG Community Development Block Grant
DST Downtown Streets Team
TMA Palo Alto Transportation Management Association
PADBPA Palo Alto Downtown Business and Professional Association
Attachment A
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Attachment A
Audit of Nonprofit Service Agreements 1
INTRODUCTION
Objective The purpose of this audit was to:
1) Determine if the City's agreements with nonprofit
organizations clearly state the outcomes the City expects
from the funding it provides.
2) Determine if City departments monitor their nonprofit
service agreements to ensure that the required services are
performed. In instances where expected outcomes are
clearly stated in the agreements, determine if City
departments monitor the progress to ensure that the
expected outcomes are achieved.
Background The City contracts with many nonprofit organizations to provide
social services to Palo Alto residents. As shown in Exhibit 1, the
City had 38 nonprofit service agreements with a contract amount
of $10,000 or more during FY 2018, providing over $4 million in
services. The Community Services Department’s Office of Human
Services (Human Services) oversees more than half of the City’s
nonprofit service agreements (21 of the 38 agreements)
providing about $1.6 million in services through nonprofits.
Appendix 1 provides detail on the 38 agreements.
EXHIBIT 1
The City’s Nonprofit Service Agreements for FY 2018
(For Agreements with a Contract Amount of $10,000 or More)
Responsible Department
Number of
Agreements
FY 2018
Contract Amount1 % of Total
Community Services - Office of Human Services 21 $1,579,146 38%
Others2 17 $2,529,209 62%
Total 38 $4,108,355 100%
1 Some agreements do not specify yearly contract amounts, and may allow certain price adjustments in subsequent contract years.
We estimated the contract amount for FY 2018 where the actual contract amount could not be determined.
2 Includes six agreements administered by other divisions of the Community Services Department, and two agreements monitored by
multiple departments.
SOURCE: City departments
The City holds its departments and the assigned project
managers responsible for monitoring contractor performance, as
shown in Exhibit 2.
Attachment A
2 Audit of Nonprofit Service Agreements
EXHIBIT 2
Contract Administration Roles and Responsibilities
SOURCE: Administrative Services Department Purchasing Division Procurement Fundamentals Training Guide
Human Services Resource
Allocation Process (HSRAP)
Human Services oversees the Human Services Resource
Allocation Process (HSRAP), a grant program open to
organizations that deliver social services directly to Palo Alto
residents. The primary goal of HSRAP is to meet the needs and
improve the quality of life of the City’s low income and
vulnerable populations. In FY 2018, the City distributed $503,213
to 17 nonprofit organizations.
Human Services also oversees agreements with three other
organizations that were previously part of the HSRAP:
• Project Sentinel for landlord-tenant mediation services
(removed from HSRAP in 2007)
• Avenidas for senior services (removed from HSRAP in 2014)
• Palo Alto Community Child Care (PACCC) for childcare subsidy
management (removed from HSRAP in 2014)
The City provided funding totaling $1,025,933 for these three
services in FY 2018.
Attachment A
Audit of Nonprofit Service Agreements 3
Palo Alto Downtown Business
and Professional Association
(PADBPA)
The City established the Palo Alto Downtown Business
Improvement District (BID) in February 2004 to levy and collect
an annual assessment from non-exempt businesses to fund
improvements and activities within the BID. The City entered into
an agreement with Palo Alto Downtown Business and
Professional Association (PADBPA) in June 2004 to undertake and
administer such improvements and activities, and required
PADBPA to submit an annual report on or before May 1st
proposing a budget and assessment for the following fiscal year.
The City Council first approves or modifies the annual report in
April or May, and holds a public hearing a few weeks later on the
levy of proposed assessments before approving a resolution
confirming the report and levying an assessment.
The agreement assigns “the City’s Economic Development
Manager or his or her designated representative” to administer
the agreement. The City eliminated the Economic Development
Manager position in FY 2018 upon a reorganization of the City
Manager’s Office. The reorganization also eliminated the 1.75
Assistant City Manager positions, and added two Deputy City
Manager and two Assistant to the City Manager positions. Staff
from the City Manager’s Office and Development Services
Department have co-administered the agreement since FY 2018.
The City eliminated one Deputy City Manager position in FY
2020, offset by a creation of one Assistant City Manager position
to better align organizational needs in the City Manager’s Office.
Palo Alto Transportation
Management Association (TMA)
The City entered into an agreement with Palo Alto
Transportation Management Association (TMA) in June 2016 to
support TMA’s mission to reduce Single Occupancy Vehicle trips,
traffic congestion and demand for parking in Palo Alto. The City
amended the agreement three times to provide additional
funding to TMA, as shown in Exhibit 3.
Attachment A
4 Audit of Nonprofit Service Agreements
EXHIBIT 3
The City’s Agreement with TMA and Funding Amount
Agreement Approved
Funding Amount
FY 2017 FY 2018 FY 2019 Total
Original Agreement Jun. 2016 $100,000 - - $100,000
Amendment No. 11 Feb. 2017 $100,000 $100,000 - $100,000
Amended and Restated Agreement1,2 Sep. 2017 - $480,000 - $480,000
Amendment No. 12,3 Dec. 2018 - - $480,000 $480,000
Total $200,000 $480,000 $480,000 $1,160,000
1 The September 2017 agreement increased the total funding to $680,000, of which the City had already paid $200,000 ($100,000 for the
original agreement and $100,000 of the $200,000 in the February 2017 amendment). The remaining $480,000 was paid on a quarterly
basis following the full execution of the agreement, which did not occur until February 2018.
2 The funding approved in the September 2017 agreement and the December 2018 amendment is provided through parking permit fee
revenues in the University Avenue Parking Permit Fund.
3 The City Manager approved the amendment as authorized by the 2017 Amended and Restated Agreement, upon appropriation of
additional funds for FY 2019 by the City Council.
SOURCE: The City’s agreements with the TMA
The Office of Transportation administers the TMA agreement and
City funding. The office was originally created under the City
Manager’s Office in June 2018 from the Planning and Community
Environment Department’s Transportation and Parking Division,
and has been established as a separate office in FY 2020. The
TMA Board of Directors consists of representatives from
employers in the downtown area, including the City. The City
pays a large employer contribution of $10,000 annually to TMA.
Downtown Streets Team (DST) Originally created by PADBPA and later incorporated as a
nonprofit in 2005, Downtown Streets Team (DST) provides its
volunteer team members who are homeless or at-risk of
becoming homeless job opportunities and other resources they
need to find permanent housing and employment. Team
members sweep streets, perform janitorial work, and provide
peer-to-peer outreach in downtown Palo Alto up to 20 hours per
week in exchange for a non-cash stipend, counseling,
transportation, and housing assistance. Team members who
demonstrate their dedication and leadership skills can become a
team lead, and then a team manager with supervising
responsibilities. DST expanded into San Jose in 2011 and
Sunnyvale in 2012, and operated in 10 other cities as of February
2019.
Attachment A
Audit of Nonprofit Service Agreements 5
Scope We reviewed the nonprofit service agreements the City had in
place during FY 2018. We focused on agreements with an annual
contract amount of $35,000 or more, and we further focused on
nonprofit organizations providing senior or nutrition services.
Methodology To accomplish our objective, we:
• Obtained from each City department a list of its nonprofit
service agreements and project managers, and compiled a
citywide list.
• Interviewed staff from the Administrative Services,
Community Services, Development Services, Planning and
Community Environment, and Public Works Departments,
City Manager’s Office, and the Office of Transportation to
understand how the City monitors its nonprofit service
agreements and to identify enhancement opportunities.
• Mapped relevant processes in coordination with City staff.
• Conducted a risk assessment to prioritize agreements and
judgmentally selected the agreements for review.
• Obtained a copy of the executed agreements, reports
submitted by the contractors, and departmental policies and
procedures where available.
• Reviewed relevant staff reports, Municipal Code sections,
City Council resolutions and ordinances, and public meeting
minutes to understand the City’s intent and expected
outcome when approving the agreements and funding.
• Reviewed the City’s Operating Budget to understand the
organizational structure of the City functions administrating
the nonprofit service agreements.
• For each agreement selected, reviewed the agreement and
other information to determine:
o If the agreement clearly states the outcomes the City
expects from the funding it provides.
o If City departments monitor the nonprofit service
agreements to ensure that the required services are
performed.
o In instances where expected outcomes are clearly stated
in the agreements, if City departments monitor the
Attachment A
6 Audit of Nonprofit Service Agreements
progress to ensure that the expected outcomes are
achieved.
Sampling methodology We judgmentally selected a sample of 12 nonprofit service
agreements for detailed review based on the type of services
provided, contract amount, and our risk assessment results.1 The
sample included nine agreements administered by the Office of
Human Services, with focus on senior and nutrition services, and
three that involved recent turnover in City staff administering the
agreements. We chose this sample design to address areas that
impact the most vulnerable population in our community based
on input received from some City Council members and to assess
how staffing issues may impact delivery of the required services.
We reviewed the sampled agreements in detail to identify any
deficiencies and to inform our conclusions. Because this was a
judgmental sample, our conclusion cannot be projected to the
total population of nonprofit services agreements.
Compliance with government
auditing standards
We conducted this audit of nonprofit service agreements in
accordance with our FY 2019 Annual Audit Work Plan and
generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objectives.
We would like to thank management and staff in the Administrative Services, Community Services,
Development Services, Planning and Community Environment, and Public Works Departments,
City Manager’s Office, Office of Transportation, and Downtown Streets Team for their time,
cooperation, and assistance during the audit process.
1 Judgmental sampling is a nonprobability sampling method where the samples selected are based on the auditor’s
judgment to focus on certain items of specific interest. Because of the subjective nature of judgmental sampling, the
results cannot be projected to the population, and instead, are generally used to determine if specific conditions exist.
Attachment A
Audit of Nonprofit Service Agreements 7
Finding The Office of Human Services effectively monitors contractor
performance using an established process and tools, which can
help other City departments better administer their nonprofit
service agreements
Summary The Office of Human Services, which oversees more than half of
the City’s nonprofit service agreements, has continuously
improved its monitoring process and tools, and built certain
requirements into the agreements to hold the contractors
accountable for their performance. Some other departments we
reviewed did not have such an established process or tools,
resulting in undetected errors and noncompliance especially
when there was staff turnover. The City can improve its oversight
of nonprofit services agreements by adopting and making Human
Services’ monitoring process and tools available to other
departments.
Human Services’ contract
templates help ensure that
expected outcomes and
required services are clearly
stated in the agreement and
closely monitored
Human Services developed its own contract template with the
Administrative Services Department’s Purchasing Division to
ensure that goals and measurable objectives to achieve the goals
are clearly stated in its agreements with nonprofit organizations.
The contract template also incorporates Human Services’
standardized monitoring process and requires the contractors to:
• Submit quarterly invoices on a form provided by the City,
specifying actual expenditures directly related to the
contract.
• Submit all deliverables, including quarterly or semiannual
reports approved by the City, before the City makes its final
payment.
Human Services also developed a semiannual program report
template for contractors to use. Contractors are required to
report performance measures to demonstrate their progress
toward contract goals and objectives, and to provide an
explanation for any unmet objectives. In addition, Human
Services recently updated its contract template to include a site
visit clause, which allowed it to start conducting site visits of the
contractor’s facilities at least once during each contract period to
verify the self-reported information.
Attachment A
8 Audit of Nonprofit Service Agreements
Stability and institutional
knowledge of Human Services
staff have allowed continuous
improvement and collaboration
The current Human Services Manager has administered the
office’s agreements with nonprofit organizations since 2009, and
has served as the staff liaison to the Human Relations
Commission, which reviews HSRAP applications, since 2010.
Another longtime Community Services employee joined the
office in 2014. With their institutional knowledge and initiative,
this two-person office was able to continuously improve its
contract design and monitoring process based on past lessons
learned. The office also uses the HSRAP application process as an
opportunity to educate applicants. For example, it recently
provided a presentation on setting effective goals and outcome
measures for HSRAP applicants at a pre-bid meeting to
encourage refinement in their HSRAP applications. Human
Services maintains an updated HSRAP policy and procedure
manual which would help minimize the loss of institutional
knowledge in case of staff turnover.
Because Human Services oversees the work of many nonprofit
organizations, it is well-positioned to encourage collaboration. It
has developed various methods to coordinate their efforts, such
as requiring a specific number of new partnerships to be
developed and monitoring their participation in local or regional
meetings. The Human Services Manager also holds monthly
meetings of the Homeless Senior Committee, comprised of the
City’s homeless service providers, to identify and collectively
work on projects or initiatives to assist homeless senior citizens
in Palo Alto.2
The City did not adjust
PADBPA’s BID budget to reflect
declining BID assessment
revenues, resulting in a negative
BID Fund balance of $32,000 in
FY 2018
The City outsourced invoicing and collection of the BID
assessments to a contractor MuniServices, an Avenu Insights &
Analytics company, in January 2016, which made some of the
requirements in the 2004 agreement with PADBPA obsolete. The
City entered into a new agreement with MuniServices in
December 2018, combining the collection services for the City’s
Business Registry and BID assessments. Despite these changes,
the City has not amended the 2004 agreement to clarify the roles
and responsibilities of the City and PADBPA. This, combined with
turnover of the Economic Development Manager position
responsible for the agreement, left the PADBPA’s noncompliance
2 Participants include Avenidas, La Comida, Downtown Streets Team, LifeMoves, Peninsula Healthcare Connection,
Momentum for Mental Health, Heart & Home Collaborative, County of Santa Clara Office of Supportive Housing.
Attachment A
Audit of Nonprofit Service Agreements 9
and errors undetected for the past few years. As a result, the City
Council did not receive accurate and complete financial
information to make informed budget and funding decisions for
the City’s BID Fund.
BID assessment revenues are recorded in the BID Fund, and the
City reimburses PADBPA for expenses included in the approved
BID budget. As shown in Exhibit 4, actual assessment revenues
have declined since FY 2016, while expenses have consistently
exceeded the revenues. The BID Fund reached a negative fund
balance of $32,000 in FY 2018, necessitating a $13,500 loan from
the General Fund to cover a negative cash balance. Upon
resignation of the PADBPA’s Executive Director in June 2018, the
City and PADBPA worked together and decided not to fill the
Executive Director position so that the salary savings can be used
to rebuild the BID Fund balance and repay the General Fund. The
position remained vacant as of May 2019 with one of the
volunteer PADBPA Advisory Committee members serving as the
Acting Executive Director.
EXHIBIT 4
Business Improvement District Fund Actual Revenues and Expenditures
FY 2015 FY 2016 FY 2017 FY 2018
Beginning Fund Balance $113,000 $44,000 $36,000 $25,000
Revenues
Assessment Revenues $86,000 $100,000 $97,000 $72,000
Other Revenues $3,000 $3,000 ($1,000) -
Total Revenues $89,000 $103,000 $96,000 $72,000
Total Expenditures $158,000 $111,000 $107,000 $129,000
Net Revenues (Expenditures) ($69,000) ($8,000) ($11,000) ($57,000)
Ending Fund Balance $44,000 $36,000 $25,000 ($32,000)
SOURCE: The City’s Comprehensive Annual Financial Report
The City Council did not receive
reliable financial information on
BID
The 2004 agreement requires PADBPA to submit its proposed BID
budget and assessment fees for review and approval by the City
Council. However, the City did not identify that PADBPA had
overstated its budgeted assessment revenues for FY 2017
through FY 2019 by not subtracting the allowance for
uncollectible assessments of $25,000 from the total estimated
revenues, as shown in Exhibit 5. This caused the City to approve
Attachment A
10 Audit of Nonprofit Service Agreements
the PADBPA’s proposed expenses that would not be sufficiently
covered by the projected revenues for three consecutive years.
PADBPA fixed this error in its FY 2020 BID budget, and subtracted
the allowance for uncollectible assessments of $25,000 from the
estimated assessment revenue of $112,500.
EXHIBIT 5
Summary of Business Improvement District Budget
Prepared by Palo Alto Downtown Business and Professional Association
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Revenues
Assessments $137,000 $125,000 $130,000 $130,000 $112,500 $112,000
Allowance for Uncollectible Assessments ($34,000) ($25,000) ($25,000) ($25,000) ($25,000) ($25,000)
Other Revenue1 $25,000 $57,000 $54,000 $29,000 $21,000 $17,0005
Surplus Carryover2 $20,000 $36,200 $13,721 $5,024 - -
Total Revenues $148,000 $193,200 $197,7213 $164,0243 $133,5003 $104,500
Total Expenses4 $148,000 $193,200 $197,721 $164,024 $133,500 $104,500
1 Revenues from non-assessment sources such as sponsorships for events and in-kind contributions for banners and services.
2 Estimated by PABDPA based on the revenue balance as of the date of budget preparation and expected expenses for the remainder of the fiscal year.
3 The total revenues were overstated by $25,000 because PADBPA did not subtract the Allowance for Uncollectible Assessments as was done through FY 2016.
4 The total expenses include the ones projected to be funded with the non-assessment revenue sources described in 1 above.
5 Represents the cost of invoicing and collecting BID assessments covered by the City’s General Fund through an operating transfer.
SOURCE: PADBPA Annual Reports
The City’s operating budget for the BID Fund also had not
reflected the prior year actuals, as shown in Exhibit 6. The
budgeted assessment revenues and expenses had remained the
same since FY 2016 at $140,000 and $148,000, respectively,
which allowed overspending of the BID Fund. Additionally,
PADBPA is not required to submit its BID budget until May 1st of
each year, which is after the proposed budget has already been
presented to the City Council’s Finance Committee. Moving up
the PADBPA’s submission due date would allow the City to
review the PADBPA’s revenue projection before finalizing the
City’s BID Fund budget. To address the issue in the meantime,
the City amended the FY 2020 Budget Appropriation Ordinance
for the BID Fund in June 2019 and adjusted its estimated
revenues and expenses to match the PADBPA’s BID budget for
FY 2020.
Attachment A
Audit of Nonprofit Service Agreements 11
EXHIBIT 6
Business Improvement District Fund Budgeted Revenues and Expenditures
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 20201
Estimated Beginning Fund Balance $83,000 $95,000 $9,000 $77,000 $32,000 $2,000
Estimated Revenues
Assessment Revenues $153,000 $140,000 $140,000 $140,000 $140,000 $87,500
Other Revenues $2,000 $2,000 $2,000 $2,000 $2,000 $17,0002
Total Estimated Revenues $155,000 $142,000 $142,000 $142,000 $142,000 $104,500
Total Estimated Expenditures $173,000 $148,000 $148,000 $148,000 $148,000 $104,500
Net Revenues (Expenditures) ($18,000) ($6,000) ($6,000) ($6,000) ($6,000) -
Estimated Ending Fund Balance $65,000 $89,000 $3,000 $71,000 $26,000 $2,000
1 In response to this audit, the City amended the FY 2020 Budget Appropriation Ordinance for the BID Fund on June 24, 2019 to align its original operating budget with the PADBPA’s BID budget.
2 Represents the cost of invoicing and collecting BID assessments covered by the City’s General Fund through an operating transfer.
SOURCE: The City’s Adopted Operating Budgets
MuniServices also provides the City with a BID reconciliation
report showing the actual assessment collection status with
each business’ information. A summary of the reconciliation
report is shown in Exhibit 7. However, this information is mainly
used by the Accounting Division for accounting purposes at year
end, and has not been presented to the City Council. Reviewing
this information would also assist the City Council in evaluating
the proposed BID assessments and budget, and providing
direction to address declining revenues.
EXHIBIT 7
MuniServices Business Improvement District Assessment Collection Status by Assessment Year
Assessment Year
BID Assessments 2016 (as of 1/22/18) 2017 (as of 7/6/18)
Paid $93,600 $70,012
Not Paid $33,400 $49,100
Total per City’s Taxpayer List $127,000 $119,112
SOURCE: MuniServices BID Reconciliation Report
Another example of missing information in the BID budget is the
cost of invoicing and collecting the assessments. PADBPA
removed invoicing cost from the FY 2019 BID budget in its effort
to reduce the budget, even though the agreement requires any
invoicing costs incurred by the City or PADBPA to be included in
Attachment A
12 Audit of Nonprofit Service Agreements
the BID budget. PADBPA budgeted $8,500 for invoicing in FY
2018, and the City paid MuniServices $8,361 for invoicing and
collection services from its BID Fund. According to the June 24,
2019 staff report, the City used its General Fund to cover the FY
2019 invoicing and collection cost. For FY 2020, PADBPA included
$17,000 for invoicing cost in its BID budget to be covered through
an operating transfer from the City’s General Fund.
Monitoring PADBPA’s financial
activities outside the BID Fund
would help the City make better
informed decisions on the BID
budget and assessment fees
The PADBPA’s annual BID budget covers financial activities that
do not go through the City’s BID Fund, including:
• Revenues from non-assessment sources and expenses funded
by those revenues, such as sponsorships for events and in-
kind contributions for banners and services.
• Delinquent assessment fees directly collected by PADBPA.
These external financial activities could significantly impact the
PADBPA’s BID budget, but the City has not monitored them to
evaluate the reasonableness of the following year’s BID budget
and assessment fees proposed by PADBPA.
The agreement requires PADBPA to submit an audit report of the
BID’s expenditures and completed activities for the preceding
fiscal year within 120 days after the fiscal year ends. However,
PADBPA has not completed the audit in a timely manner for the
last three years, as shown in Exhibit 8.
EXHIBIT 8
Palo Alto Downtown Business and Professional Association’s Audited Financial Statements
For Fiscal Year Ending: Submission Due Date Audit Completion Date
June 30, 2016 October 28, 2016 May 15, 2017
June 30, 2017 October 28, 2017 August 31, 2018
June 30, 2018 October 28, 2018 February 28, 2019
SOURCE: The City’s Agreement with PADBPA and PADBPA Audited Financial Statements
As shown in Exhibit 9, the PADBPA’s actual non-assessment
revenues have declined over the years. For example, PADBPA
raised only $5,850 of the projected $45,000 in sponsorships to
fund events and the summer concert series in FY 2017.
Consequently, it had to use its cash balance to cover the actual
event costs of $23,534. For FY 2018, PADBPA raised $7,200 and
Attachment A
Audit of Nonprofit Service Agreements 13
spent $8,119 in event costs, which was much less than the
budgeted amount of $28,000. Having PADBPA’s financial
information would be helpful for the City to make informed
decisions on PADBPA’s proposed BID budget and assessments.
EXHIBIT 9
PADBPA’s Budgeted vs. Actual Non-Assessment Revenues
Non-Assessment Revenues1 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
Projected - BID Budget
Events $15,000 - $5,000 - -
Summer Concert Series - $40,000 $40,000 $28,000 $20,000
Legal Service $1,000 $1,000 $1,000 $1,000 $1,000
Banners $8,000 $16,000 $8,000 - -
Outreach & Communication $1,000 - - - -
Total $25,000 $57,000 $54,000 $29,000 $21,000
Actual - PADBPA Audited Financial Statements
Sponsorships $40,850 $25,000 $5,850 $7,200 n/a
Audit and Tax Services $7,975 $4,525 $4,550 $4,525 n/a
Total $48,825 $29,525 $10,400 $11,725 n/a
1 Revenues from non-assessment sources such as sponsorships for events and in-kind contributions for banners and services.
SOURCE: PADBPA’s financial documents
The actual assessment revenues recorded in the PADBPA’s
financial statements are also different from the amounts
recorded in the City’s Comprehensive Annual Financial Report
(CAFR), as shown in Exhibit 10.
EXHIBIT 10
Comparison of Actual Assessment Revenues - City’s CAFR vs. PADBPA Financial Statements
Actual Assessment Revenues FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
City’s CAFR $86,000 $100,000 $97,000 $72,000 n/a
PADBPA Audited Financial Statements $120,975 $107,548 $100,736 $120,412 n/a
SOURCE: The City’s and PADBPA’s financial documents
The difference may represent the delinquent fees directly
collected by PADBPA, although we did not verify it. The
agreement allows PADBPA to submit a written request to the
City after 90 days of delinquency to have past due assessments
assigned to PADBPA for collection with the right to receive any
amounts collected for benefit of the BID. The City has not
Attachment A
14 Audit of Nonprofit Service Agreements
monitored how much has been collected directly by PADBPA to
gain a complete understanding of the collection rate for each
year. The City has not assigned delinquent assessments to
PADBPA since collection has been outsourced to MuniServices.
The City did not ensure TMA’s
compliance with reporting
requirements but has since
strengthened its oversight
The City’s agreement with TMA was originally for “pilot projects”
intended to reduce single occupancy vehicle trips by downtown
workers. Therefore, rather than specifying goals and objectives
in the agreement, the City required TMA to conduct an annual
strategic planning session to produce “3-year goals and
objectives and funding requirements, and a budget with
projected metrics (cost per mode shift, ROI [Return on
Investment], etc.)” for review and approval by the City.
However, the City had not closely monitored TMA’s compliance
due to transportation staff turnover. As a result, the City did not
receive some required information from TMA. The City and TMA
have since worked together to rectify noncompliance, and
addressed all the issues identified in this audit as of June 2019.
Both the City and TMA were
affected by staff turnovers
Both the City and TMA experienced high rate of staff turnover in
recent years. For example, the Transportation Planning Manager
position turned over three times in the last three years with the
previous manager leaving in March 2018 and the current
manager starting in July 2018. The Chief Transportation Official,
who oversaw the TMA agreement while the Transportation
Planning Manager position was vacant, left the City in
September 2018. The TMA’s programs are supported by the
Board of Directors who volunteer their time and a paid, part-
time executive director. The current executive director started in
July 2018, after the previous director hired in April 2018
resigned.
TMA did not meet certain reporting requirements as a result of
these transitions. For example, the agreement requires TMA to
provide a detailed, updated strategic plan and budget to the City
annually, identifying the pilot projects to be funded by the City
for the City Manager’s review and approval. TMA finalized its
first “Business Plan” in August 2016, which outlined the
strategies with a goal to reduce single occupancy vehicle trips to
downtown Palo Alto over the next several years by 30 percent.
Attachment A
Audit of Nonprofit Service Agreements 15
In September 2017, the City Council amended and restated the
agreement to:
• Extend the term from December 31, 2018 to July 1, 2020
• Provide $480,000 in funding for FY 2018
• Authorize the City Manager to execute future amendments
to provide additional funding approved by Council in the
City’s FY 2019 and FY 2020 budgets
The City Council also directed TMA to present its business plan
prior to the FY 2019 budget to allow informed budget allocation
in May and June 2018. However, the City Council did not receive
an updated plan until June 2019 as described below.
The agreement also required TMA to “provide the City Council
with quarterly written reports on the implementation and
effectiveness of pilot programs funded by the City, including
quantitative measures of Single Occupancy Vehicle trip
reduction and mode shift achieved, metrics used, cost per
employee mode shift, and how the City Funds were expended.”
Although TMA submits a quarterly report along with its
quarterly invoice to the City, the report had not included all
required information such as cost per employee mode shift and
how TMA spent the City funds. Additionally, City staff had not
submitted the TMA’s quarterly reports to the City Council.
The City and TMA have since
addressed all instances of
noncompliance
Both the Transportation Planning Manager and the TMA’s
Executive Director have taken immediate steps to rectify the
noncompliance, acknowledging the need to meet all contractual
requirements and to keep the City Council better informed on
TMA’s program implementation status and effectiveness. As
part of this effort, the City amended the September 2017
agreement to clarify that the quarterly reports are provided to
City staff, not directly to the City Council. At the same time, TMA
instituted an enhanced annual reporting process. In its annual
report presented to the City Council in January 2019, TMA
included improved and expanded data for evaluation of program
performance, preliminary data from the 2018 Downtown
Commute Survey, and opportunities and challenges in achieving
its goals. TMA subsequently held strategic planning sessions, and
the Executive Director updated the Finance Committee in April
2019 and asked for input on various funding scenarios, desired
mode shift ideas, potential outcomes, and performance
Attachment A
16 Audit of Nonprofit Service Agreements
measures. Such dialogue can greatly benefit the City Council as it
discusses projects and issues involving transportation and
parking, and informs related funding decisions in May and June.
TMA finalized the 2019 Strategic Business Plan in May 2019,
which was transmitted to the City Council in June 2019.
Measuring progress toward the
TMA’s goal is difficult without
reliable data on Downtown
employees
In its August 2016 Business Plan, TMA estimated that the
population of Downtown employees was approximately 10,000
based on the City’s Business Registry and the 2016 Downtown
Employee Commute Survey. Starting from the baseline of 5,500
employees driving alone to work as identified in the May 2015
benchmark survey (55 percent of 10,000 downtown employees),
TMA estimated that its goal of 30 percent reduction in single
occupancy vehicle (SOV) trips to downtown Palo Alto would
change the commute patterns of about 1,650 employees. In its
May 2019 Strategic Business Plan, TMA estimated the number of
downtown employees to be approximately 5,000, which is half
of the 2016 estimate. Using an adjusted baseline SOV rate of 57
percent, TMA estimated that 30 percent reduction from 57
percent yields a goal of 40 percent SOV rate, or 850 commuters
to shift away from SOV (17 percent of 5,000 downtown
employees).3 Although the agreement states that the City may
elect to share certain data from its Business Registry with TMA
for TMA’s program development and marketing, TMA has had
difficulty accessing the Business Registry data. Due to data
reliability issues as identified in the August 2018 Business
Registry Audit, estimating the population of downtown
employees continues to be a challenging task.
The City has multiple
agreements with DST, requiring
improved coordination among
City departments to monitor
overlapping scope of services
Downtown Streets Team (DST) receives funding from the City
through four different channels, and different City departments
separately administer the distribution of funds. There was little
coordination among City departments, which increased the risk
of duplicate payments by the City for the same services. Exhibit
11 shows the funding the City provided to DST in FY 2018.
3 The June 2017 Downtown Employee Commute Survey weighted prior year datasets to hold worksite type and worksite
size constant, changing the May 2015 SOV rate from 55 percent to 57 percent.
Attachment A
Audit of Nonprofit Service Agreements 17
EXHIBIT 11
The City’s FY 2018 Funding Provided to Downtown Streets Team
City Funding
Responsible
Department Amount Scope of Services
1. Cleaning and Maintenance/
University Avenue Parking
Permit Fund & General Fund
Public Works $136,872 Street cleaning services for the City’s five
parking garages, sidewalks, and alleyways
in downtown funded by parking permit
revenues. Also includes litter clean up at
Lytton and Cogswell Plazas, Stanford/Palo
Alto Playing Fields, and Old Community
Garden funded by General Fund.
2. HSRAP/General Fund Community
Services/Human
Services
$74,572 Services to the homeless, including job
skills training, work experience, and access
to food through the Palo Alto Food Closet.
3. Department of Housing and
Urban Development
Community Development
Block Grant (CDBG)
Planning $336,400 Workforce Development Program to
provide homeless and/or extremely low
income individuals with job readiness
training and employment opportunities.
4. PADBPA/BID Assessments City Manager $5,000 A discretionary fund approved as part of
the annual BID budget. The amount was
reduced to $3,000 for FY 2019.
Total $552,844
SOURCE: City’s agreements with the DST
Human Services and Planning
started working together to
clarify their scopes of services for
the next funding cycle
The City’s agreements with DST for HSRAP and Community
Development Block Grant (CDBG) had similar scope of services for
FYs 2018 and 2019, which could have caused duplicate payments
by the City. Both DST and City staff stated that HSRAP and CDBG
fund different DST staff members, or separate activities by the
same staff member, even though the program goals and methods
are very similar. They acknowledged the need to clarify the
differences going forward. The Human Relations Commission
reviews both HSRAP and CDBG applications and provides funding
recommendations to the Finance Committee and the City Council.
Human Services and Planning staff had not reviewed each other’s
scope of services in the past to prevent potential duplication.
Like HSRAP, Planning has a dedicated resource to administer the
CDBG agreements, and uses established monitoring process and
tools, including semiannual reports, to ensure the City’s
compliance with the federal requirements for subrecipient
monitoring. Human Services and Planning staff have already
started working together to clearly distinguish the two agreements
Attachment A
18 Audit of Nonprofit Service Agreements
prior to finalizing the scope of services for each funding cycle.
Three other nonprofit organizations received funding from both
HSRAP and CDBG in FY 2018 (LifeMoves, Palo Alto Housing
Corporation, and Project Sentinel), but we did not identify such
overlap.
Public Works no longer pays for
the DST’s case management
services, eliminating the risk of
duplicate payments for similar
services provided through HSRAP
Public Works’ cleaning and maintenance agreement with DST
includes outreach and case management services. The City used to
pay $20,000 a year for these services under the agreement, even
though it had been paying DST for the same services through
HSRAP since FY 2011. Public Works did not require DST to provide
a detailed statement of services performed with the invoice and
did not monitor how DST was using the $20,000 a year. According
to DST management, DST used the $20,000 a year to offset the
case management costs incurred to house formerly homeless
individuals from Palo Alto. As the years have gone by, however,
they have had less access to housing due to lack of available
housing. The City and DST agreed to remove this annual
compensation of $20,000 in its current three-year cleaning and
maintenance agreement renewed in November 2017.
The cleaning and maintenance
schedule specified in the
agreement is not practical for
DST to follow
The cleaning and maintenance agreement includes a detailed
schedule of performance as shown in Appendix 2. DST has not
followed this schedule because it is not practical or feasible for DST
team members to follow such a rigid schedule. DST instead uses a
more loosely structured shift system as shown in Exhibit 12 to
allow its team members, many of whom are just beginning to
develop their basic job skills, more flexibility while ensuring that
the assigned areas are cleaned during the shift. For example, the
schedule in the agreement requires DST to clean Lytton Plaza from
11:30am to noon and from 3:30pm to 4pm on Mondays. The DST’s
Project Manager for Palo Alto instead directs the team members
to meet at Lytton Plaza at 8am to complete the maintenance tasks,
and clean the Plaza again during the shift to ensure that the Plaza
is cleaned at least twice per shift, or three to four times a day. The
Project Manager also modifies the schedule based on the weather
and the seasons to take advantage of sunlight and to keep the
team members safe.
Attachment A
Audit of Nonprofit Service Agreements 19
EXHIBIT 12
Downtown Streets Team’s Cleaning and Maintenance Shifts as of June 2018
Shifts* (# team
members assigned) Mon Tue Wed Thu Fri Sat Sun
PADPW AM (7-8) 8am-Noon 8am-Noon 8am-Noon 8am-11am 8am-Noon - -
Garages AM (2) 8am-Noon 8am-Noon 8am-Noon 8am-11am 8am-Noon - -
PADPW PM (3-6) Noon-4pm Noon-4pm Noon-4pm 8am-11am Noon-4pm - -
S/S PADPW and
Garages AM (6-8)
- - - - - 8am-2pm 8am-2pm
S/S Garages PM (2) - - - - - 4pm-8pm 4pm-8pm
Page Mill (2) - - - - 6am-9am 6am-9am 6am-9am
* The DST Project Manager for Palo Alto assigns available team members to cover each shift on a weekly basis:
PADPW - Downtown streets, alleyways, Lytton Plaza, Cogswell Plaza, and Old Community Garden
Garages - Bryant/Lytton, High/Alma South, High/Alma North, Webster/Cowper, and Civic Center garages
S/S - Saturday and Sunday
Page Mill - Stanford/Palo Alto Playing Fields
SOURCE: Downtown Streets Team
DST tracks performance
measures that can be used to
evaluate the service level
Although City staff perform spot checks, the City has not tracked
DST’s performance measures to evaluate the service level under
the cleaning and maintenance agreement. As mentioned earlier,
the City has not required DST to provide a detailed statement of
services performed when submitting an invoice. DST tracks its
own performance measures, and reports them to the
jurisdictions it works with when required or requested. DST
reports its performance measures for the HSRAP and CDBG
agreements in a semiannual report to the City, and stated that
they would be happy to work with the City to set the
performance measures for the cleaning and maintenance
agreement and report them on a regular basis. For example, the
City of San Rafael sets a targeted number of cleanup hours by
DST team members and has tracked the actual hours to evaluate
DST’s performance. DST also tracks the amount of debris
removed, and the number of cigarette butts in cities with a
recycling program for them, to quantify the cleanup work it
performs.
Attachment A
20 Audit of Nonprofit Service Agreements
Recommendations We recommend that the City Manager:
1. Work with the Administrative Services Department’s
Purchasing Division, the City Attorney’s Office, and the
Community Services Department’s Office of Human Services
to create a citywide template for nonprofit service
agreements, and make it available to all City departments.
The template should ensure that the City’s payments are tied
to contractor performance by:
a. Specifying program goals, measurable objectives, and
performance targets are specified in the scope of
services.
b. Requiring specific deliverables (e.g., semiannual report,
financial statements) are submitted along with each
invoice, rather than requiring “a detailed statement” in
broad terms that could be subject to interpretation.
c. Requiring all deliverables be provided prior to the final
payment.
2. Renew the 2004 agreement with PADBPA to:
a. Require that a preliminary BID budget be submitted in
accordance with the City’s budget schedule to ensure
that the City operating budget is aligned with the
PADBPA’s budget.
b. Require that PADBPA include in its annual report
previous two years’ budgeted and actual revenues and
expenses in a format similar to the City’s operating
budgets for better projection of the following fiscal year
budget.
c. Require that collection status, including delinquencies
and any subsequent collections by PADBPA, be included
in the annual report.
d. Reflect the outsourcing of the assessment invoicing and
collection and elimination of the Economic Development
Manager position.
3. Establish a procedure or desk manual to clarify roles and
responsibilities for monitoring the BID Fund records in SAP,
PADBPA’s financial records, and MuniServices’ assessment
collection data to ensure that accurate and complete
Attachment A
Audit of Nonprofit Service Agreements 21
financial data are provided to the City Council for informed
budget and funding decisions.
4. Establish an overall monitoring method to ensure that
nonprofit organizations with multiple agreements with the
City are reviewed by all responsible departments to avoid
redundancy while clarifying the goals, objectives, and
performance measures to be tracked under each agreement.
Attachment A
22 Audit of Nonprofit Service Agreements
APPENDIX 1 – The City’s Nonprofit Service Agreements for FY 2018 (Total Contract Amount of $10K or More)
No.
Nonprofit
Organization Name
Start
DATE
End
DATE
Contract Amount1 Responsible
Department Purpose
Reviewed in
this Audit? Total FY 2018
1 Abilities United 7/1/17 6/30/19 $44,691/yr $44,691 Community Services
/Human Services
HSRAP - Disability services. Yes
2 Acterra 1/13/16 1/12/19 $84,780/yr $84,780 Public Works School outreach and creek
monitoring.
No
3 Acterra 4/8/16 12/31/18 $6,480/yr $6,480 Public Works Irrigation, maintenance, and
reporting.
No
4 Acterra
(Grassroots Ecology)
7/1/13 6/30/18 $36,646/yr $36,646 Community Services Habitat restoration at Foothills Park. No
5 Acterra
(Grassroots Ecology)
Nov. ‘16 Nov. ‘19 $32,000 $11,000 Community Services Protection of oak saplings at Pearson
Arastradero Preserve to ensure
growth. Mitigation for tree removal
at golf course (contract amount varies
each year).
No
6 Acterra
(Grassroots Ecology)
7/1/17 6/30/22 $75,720/yr $75,720 Community Services Habitat Restoration at Pearson
Arastradero Preserve.
No
7 Adolescent
Counseling Services -
Outlet
7/1/17 6/30/19 $10,250/yr $10,250 Community Services
/Human Services
HSRAP - Services to lesbian, gay,
bisexual, transgender, queer and
questioning (LGBTQQ) youth and
their straight allies.
No
8 Avenidas 9/15/15 6/30/20 $453,897/yr $477,341 Community Services
/Human Services
Senior programs (formerly part of
HSRAP).
Yes
9 Canopy 7/1/17 6/30/20 $395,130 $131,710 Public Works Urban forestry professional services,
outreach, and education.
No
10 Community Working
Group
7/1/17 6/30/19 $30,000/yr $30,000 Community Services
/Human Services
HSRAP - Services to homeless Palo
Alto residents.
No
Attachment A
Audit of Nonprofit Service Agreements 23
No.
Nonprofit
Organization Name
Start
DATE
End
DATE
Contract Amount1 Responsible
Department Purpose
Reviewed in
this Audit? Total FY 2018
11 Counseling & Support
Services for Youth
7/1/17 6/30/19 $35,000/yr $35,000 Community Services
/Human Services
HSRAP - Mental health support on
Palo Alto Unified School District
secondary school campuses.
Yes
12 Downtown Streets
Team
7/1/17 6/30/19 $74,572/yr $74,572 Community Services
/Human Services
HSRAP - Services to the homeless,
including job skills training, work
experience, and food for low income
individuals through the Palo Alto
Food Closet.
Yes
13 Downtown Streets
Team
11/12/17 11/11/20 $136,872/yr
$136,872
Public Works
Consists of 1) street cleaning services
for the City’s five parking garages,
sidewalks, and alleyways in the
Downtown Palo Alto area funded by
University Avenue Parking Permit
Fund ($107,748/yr); and 2) litter clean
up at Lytton and Cogswell Plazas,
Stanford/Palo Alto Playing Fields, and
Old Community Garden between Red
Cross and El Camino Park. This
portion is monitored by Community
Services Department and funded by
General Fund ($29,124/yr).
Yes
14 DreamCatchers 7/1/17 6/30/19 $23,609/yr $23,609 Community Services
/Human Services
HSRAP - Tutoring for low income
middle school students.
No
15 Ecology Action2 6/30/15 6/30/18 $925,000 $308,333 Utilities Commercial/Key Account Energy
Efficiency.
No
16 Ecology Action 6/1/15 6/30/18 $650,000/yr $650,000 Utilities Small/Medium Business Energy
Efficiency.
No
17 Kara 7/1/17 6/30/19 $18,565/yr $18,565 Community Services
/Human Services
HSRAP - Grief support. No
Attachment A
24 Audit of Nonprofit Service Agreements
No.
Nonprofit
Organization Name
Start
DATE
End
DATE
Contract Amount1 Responsible
Department Purpose
Reviewed in
this Audit? Total FY 2018
18 La Comida 7/1/17 6/30/19 $36,372/yr $36,372 Community Services
/Human Services
HSRAP - Nutrition program for
persons 60 years of age or older.
Yes
19 LifeMoves 7/1/17 6/30/19 $35,257/yr $35,257 Community Services
/Human Services
HSRAP - Food services for homeless
and very low income Palo Alto
residents.
Yes
20 Mayview Health
Center
7/1/17 6/30/19 $26,990/yr $26,990 Community Services
/Human Services
HSRAP - Health services for low
income, uninsured Palo Alto
residents.
No
21 Momentum for
Mental Health
7/1/17 6/30/19 $44,724/yr $44,724 Community Services
/Human Services
HSRAP - Outreach to people in Palo
Alto who are homeless and have a
mental illness.
Yes
22 Palo Alto Community
Child Care
9/15/15 6/30/20 $459,841/yr $483,592 Community Services
/Human Services
Management of City's child care
subsidy program (formerly part of
HSRAP).
Yes
23 Palo Alto Downtown
Business &
Professional
Association
6/25/04 Renewed
annually
upon
Council
approval
Based on
annual
budget
submitted
to Council
$164,024 City Manager Administration of the Palo Alto
Downtown Business Improvement
District.
Yes
24 Palo Alto Historical
Association
6/27/16 6/30/19 $139,519 $47,544 Library Management of the City’s archives
and facilitate public access to
information and materials relating to
the City.
No
25 Palo Alto Housing
Corp
7/1/17 6/30/19 $20,001/yr $20,001 Community Services
/Human Services
HSRAP - Various program for low
income youth and seniors.
No
26 Palo Alto Housing
Corp
7/1/17 6/30/19 $274,000 $137,000 Planning Below Market Rate administration. No
Attachment A
Audit of Nonprofit Service Agreements 25
No.
Nonprofit
Organization Name
Start
DATE
End
DATE
Contract Amount1 Responsible
Department Purpose
Reviewed in
this Audit? Total FY 2018
27 Palo Alto
Transportation
Management
Association
6/20/16 7/1/20 $680,000 $480,000 Transportation Serving as Transportation
Management Association for Palo
Alto.
Yes
28 Partners & Advocates
for Remarkable
Children & Adults
7/1/17 6/30/19 $10,959/yr $10,959 Community Services
/Human Services
HSRAP - Services for disabled adults. No
29 Peninsula HealthCare
Connection
7/1/17 6/30/19 $29,684/yr $29,684 Community Services
/Human Services
HSRAP - Mental & Physical
HealthCare for low income and
homeless Palo Alto residents.
No
30 Project Sentinel 7/1/16 6/30/19 $65,000/yr $65,000 Community Services
/Human Services
Landlord-Tenant Mediation Program
(formerly part of HSRAP).
Yes
31 Regional Government
Services3
7/1/16 6/30/19 $20,860 $7,000 Planning Management development. No
32 Santa Clara County
Firesafe Council
7/1/13 6/30/20 $66,700/yr $66,700 Community Services Community Services portion for
management plan to clear brush
along Page Mill Road and surrounding
areas.
No
$54,800/yr $54,800 Public Works Public Works portion for Fire
prevention, fuels mitigation,
evacuation route clearance,
assessment, and outreach.
No
$60,000/yr $60,000 Fire Fire portion for planned prescribed
burns and/or risk assessment and
training about wildland fire behavior.
No
33 Senior Adult Legal
Assistance
7/1/17 6/30/19 $14,401/yr $14,401 Community Services
/Human Services
HSRAP - Legal Assistance for older
adults.
No
34 Stanford Hospital and
Clinics3
2/6/17 2/5/20 $45,000 $15,000 Fire Medical oversight for ambulance
transport services.
No
Attachment A
26 Audit of Nonprofit Service Agreements
No.
Nonprofit
Organization Name
Start
DATE
End
DATE
Contract Amount1 Responsible
Department Purpose
Reviewed in
this Audit? Total FY 2018
35 Vista Center for the
Blind and Visually
Impaired
7/1/17 6/30/19 $26,475/yr $26,475 Community Services
/Human Services
HSRAP - Vision rehabilitation services
for seniors in Palo Alto.
No
36 Youth Community
Service
6/1/17 5/30/20 $55,600/yr $55,600 Community Services Service-learning summer camp. No
37 Youth Community
Services
7/1/17 6/30/19 $21,663/yr $21,663 Community Services
/Human Services
HSRAP - Community Service &
Leadership program for middle & high
school students.
No
38 Youth Community
Services (Youth
Connectedness
Initiative)
7/1/17 6/30/20 $50,000/yr $50,000 Community Services
/Human Services
Collaboration with County of Santa
Clara.
No
1 An annual amount is shown under the total amount if it is specified by the agreement. Some agreements do not specify yearly contract amounts, and may allow certain price
adjustments in subsequent contract years.
2 The total compensation is $925,000 a year for this contract and two other contracts combined, not to exceed $2,775,000 over the original three-year contract term. We estimated the
total contract amount to be one third of the $2,775,000, or $925,000, and the FY 2018 amount to be a third of the $925,000, or $308,333. The actual compensation differs because
there is no specific allocation among the three contracts, and the contract term was extended by two years through June 30, 2020.
3 The FY 2018 amount is an estimate based on the contract amount and term.
SOURCE: City departments
Attachment A
Audit of Nonprofit Service Agreements 27
APPENDIX 2 – The DST’s Cleaning and Maintenance Schedule in the Agreement
Attachment A
28 Audit of Nonprofit Service Agreements
APPENDIX 2 – The DST’s Cleaning and Maintenance Schedule in the Agreement
(Continued)
Attachment A
Audit of Nonprofit Service Agreements 29
APPENDIX 2 – The DST’s Cleaning and Maintenance Schedule in the Agreement
(Continued)
Attachment A
30 Audit of Nonprofit Service Agreements
APPENDIX 3 – City Manager’s Response
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report
progress on implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been
implemented.
Recommendation
Responsible
Department(s)
Agree, Partially Agree, or Do Not Agree
and Target Date and Corrective Action
Plan
To be completed 6 months after Council acceptance and every 6 months thereafter until all recommendations are
implemented
Current Status Implementation Update and
Expected Completion Date
Finding: The Office of Human Services effectively monitors contractor performance using an established process and tools, which can help other City departments
better administer their nonprofit service agreements.
We recommend that the City Manager:
1. Work with the Administrative
Services Department’s Purchasing
Division, the City Attorney’s Office,
and the Community Services
Department’s Office of Human
Services to create a citywide template
for nonprofit service agreements, and
make it available to all City
departments. The template should
ensure that the City’s payments are
tied to contractor performance by:
a. Specifying program goals,
measurable objectives, and
performance targets are specified
in the scope of services.
b. Requiring specific deliverables
(e.g., semiannual report, financial
statements) are submitted along
with each invoice, rather than
requiring “a detailed statement”
ASD/CAO/CSD/CMO Concurrence: Agree.
Target Date: December 2020
Action Plan:
Sept 2019 – June 2020:
Interdepartmental team reviews and
makes adjustments to business processes
for nonprofit service agreement creation
and management.
June 2020 – December 2020: Develop
template(s) and any other necessary
implementation materials or guidelines.
Attachment A
Audit of Nonprofit Service Agreements 31
Recommendation
Responsible
Department(s)
Agree, Partially Agree, or Do Not Agree
and Target Date and Corrective Action
Plan
To be completed 6 months after Council acceptance and every
6 months thereafter until all recommendations are
implemented
Current Status Implementation Update and
Expected Completion Date
in broad terms that could be
subject to interpretation.
c. Requiring all deliverables be
provided prior to the final
payment.
2. Renew the 2004 agreement with
PADBPA to:
a. Require that a preliminary BID
budget be submitted in
accordance with the City’s budget
schedule to ensure that the City
operating budget is aligned with
the PADBPA’s budget.
b. Require that PADBPA include in its
annual report previous two years’
budgeted and actual revenues and
expenses in a format similar to the
City’s operating budgets for better
projection of the following fiscal
year budget.
c. Require that collection status,
including delinquencies and any
subsequent collections by PADBPA,
be included in the annual report.
d. Reflect the outsourcing of the
assessment invoicing and
collection and elimination of the
Economic Development Manager
position.
CMO/CAO/ASD Concurrence: Agree.
Target Date: June 2020
Action Plan:
Sept – Dec 2019: Partner with PADBPA to
identify shared understanding of
agreement requirements.
Jan – June 2020: Partner with CAO and
PADBPA to propose revised agreement
language and renewal of the agreement
to Council.
Attachment A
32 Audit of Nonprofit Service Agreements
Recommendation
Responsible
Department(s)
Agree, Partially Agree, or Do Not Agree
and Target Date and Corrective Action
Plan
To be completed 6 months after Council acceptance and every
6 months thereafter until all recommendations are
implemented
Current Status Implementation Update and
Expected Completion Date
3. Establish a procedure or desk manual
to clarify roles and responsibilities for
monitoring the BID Fund records in
SAP, PADBPA’s financial records, and
MuniServices’ assessment collection
data to ensure that accurate and
complete financial data are provided to the City Council for informed
budget and funding decisions.
CMO Concurrence: Agree.
Target Date: March 2020
Action Plan: Incorporate into workplan
for item 2.
4. Establish an overall monitoring
method to ensure that nonprofit
organizations with multiple
agreements with the City are
reviewed by all responsible
departments to avoid redundancy
while clarifying the goals, objectives,
and performance measures to be
tracked under each agreement.
ASD Concurrence: Agree.
Target Date: June 2020
Action Plan: Identity required resources
including staff support to complete this
function, develop a proposal for
implementation to be considered as part
of the annual budget process.
Attachment A