HomeMy WebLinkAboutStaff Report 13910
City of Palo Alto (ID # 13910)
Policy and Services Committee Staff Report
Meeting Date: 6/14/2022 Report Type: Action Items
City of Palo Alto Page 1
Title: Office of the City Auditor's Presentation of the Non -Profit Agreement
Management Audit Report and Recommend the City Council Accept the
Report
From: City Manager
Lead Department: City Auditor
Recommendation
The City Auditor recommends that the Policy & Services Committee review the attached
Non-Profit Agreement Management report and corresponding recommendations for
improvement and recommend that the City Council accept the report.
Background
Discussion
Baker Tilly, in its capacity serving as the Office of the City Auditor (OCA), performed a
citywide risk assessment that assessed a wide range of risk areas, including strategic,
financial, operational, compliance, technological, and reputation risks. The purpose of
the assessment was to identify and prioritize risks to develop the annual audit plan.
During the FY2021 risk assessment, the OCA identified risks related to nonprofit
agreements and included an audit activity in the annual audit plan.
Through various agreements, the City of Palo Alto (City) often supports nonprofit
organizations that serve the community to achieve their mission. Such agreements
include grant agreements (e.g., Community Development Block Grant (CDBG)),
professional services agreements, general services agreements, facilities agreements,
and lease agreements. The OCA performed a review of the City’s practices to
management agreements with nonprofits.
City of Palo Alto Page 2
Through the audit activity, the OCA identified four (4) recommendations. The City
Manager’s Office concurred with each finding and has drafted action plans for each
item.
The Office of the City Auditor will perform periodic follow up procedures to validate that
the recommendations have been addressed as indicated in management responses.
The analysis, observations, and recommendations are summarized in the attached
report.
Timeline
Resource Impact
Included in the management responses is a recommended initial step of establishing an
updated policy and proceedure regarding these partnerships. This will be completed by
existing staffing and prioritized among other competing projects.
Overall, the best practices recommended will require additional resources to ensure a
higher and level of oversight and a more consistent approach compared to current
decentralized operations. The recommendations included in the audit report will impact
staff resources, particularly for departments that manage facilities occupied by a
significant amount of nonprofits and or leases, such as the Community Services and
Administrative Services Departments. In addition, other recommendations included in
the report would require consultant services such as appraisal services.
Policy Implications
The City’s Public/Private Partnership policy (1-25/MGR) last revised in 2007 and the
City’s Leased Use of City Land/Facilities Policy (1-11/ASD) will be updated as part of the
City’s responses to this audit.
Stakeholder Engagement
The objectives of the audit activity were to:
1) Determine whether appropriate policies and procedures are applied consistently by
all departments of City of Palo Alto for entering into and monitoring agreements
with nonprofit organizations.
2) Determine whether adequate processes and monitoring activities are implemented
to ensure that performance requirements are met by nonprofit organizations.
The timeline for implementation of corrective action plans is identified within the
attached report. All corrective actions are scheduled to be implemented by Fall of
2022.
City of Palo Alto Page 3
Environmental Review
Attachments:
• Office of the City Auditor - Nonprofit Agreement Report (P&S 6.12.22)
The Office of the City Auditor worked primarily with the City Manager’s Office and
engaged with additional stakeholders, including the Community Services Department,
the Administrative Services Department, and the City Attorney’s Office, as necessary.
The audit report and its findings are not considered a Project under the California
Environmental Quality Act (CEQA).
1
City of Palo Alto
Office of the City Auditor
Nonprofit Agreement
Risk Management Review
June 14, 2022
2
Executive Summary
Purpose of the Audit
Baker Tilly US, LLP (Baker Tilly), in its capacity serving as the Office of the City Auditor (OCA), performed a
Nonprofit Agreement Risk Management Review. The objectives of this review were to:
1) Determine whether appropriate policies and procedures are applied consistently by all departments of City
of Palo Alto (the City) for entering into and monitoring agreements with nonprofit organizations.
2) Determine whether adequate processes and monitoring activities are implemented to ensure that
performance requirements are met by nonprofit organizations.
Report Highlights
Finding 1: Nonprofit Service Agreements
(Page 18) It is important for the City to assess and monitor performance of nonprofit organizations to
ensure that the intended services are provided to citizens efficiently and effectively. In many of
the 10 nonprofit service agreements the OCA reviewed, the Scope of Services section
included the City’s expectations such as goals, expected activities, performance measures,
deliverables, and periodic reporting requirements. However, three agreements did not include
adequate information on performance and reporting expectations. Additionally, three
agreements had some instances of noncompliance with the required reports and deliverables.
The responsibilities the City is required to perform are also included in some agreements.
Key Recommendations
• All nonprofit agreements should define the service level expectations, including the
goals, performance measures, and reporting requirements that enable the City to
monitor the performance of nonprofit organizations and achievement of intended
benefits. The higher the risk associated with an agreement, the more refined the
performance and reporting expectations should be. The City should also ensure that
appropriate City resources are assigned to high-risk agreements to manage such
contracts and relationships adequately. Appropriate corrective actions should be taken
upon identification of poor performance.
• The City should take steps to ensure that the City’s responsibilities in the agreements
are achievable before the agreements are signed.
• The City should track performance to identify the risks associated with continuing or
discontinuing the contractual relationships with nonprofits and take appropriate actions.
Finding 2: Nonprofit Lease Agreements
(Page 19) The City enters into lease agreements as a means of supporting nonprofit organizations in the
community. The OCA obtained all lease agreements the City had with nonprofit organizations
as of August 2021 and compared the terms. Six out of 12 lease agreements with annual rent
of $1 or less have separate service agreements that are administered by the City’s project
managers from the applicable City departments. For the other six agreements without
separate service agreements, four lease agreements do not include any performance and
reporting requirements other than brief descriptions of services to be provided on the
premises. Two other agreements require only annual submission of a report of operations.
3
Additionally, the City’s Leased Use of City Land/Facilities Policy does not discuss the process
to ensure that the intended services are provided on the premises. Furthermore, the City’s
non-monetary support was not analyzed using the estimated fair market rental value as
required by the policy.
Key Recommendations
• Lease agreements with significantly reduced rent amounts should include performance
and reporting requirements, if there is no separate agreement for the services provided
on the premises. Depending on the risks associated with an agreement, the City may
need to assign a project manager, a liaison and/or a relationship manager from the
appropriate City department(s) to monitor the performance.
• The City’s non-monetary support should be analyzed based on the estimated fair
market rental value and non-monetary benefits to be provided by nonprofit
organizations to determine the appropriate compensation for nonprofits’ use of the City-
owned properties.
4
Table of Contents
Executive Summary ........................................................................................................................................................... 2
Purpose of the Audit ..................................................................................................................................................... 2
Report Highlights ........................................................................................................................................................... 2
Introduction ......................................................................................................................................................................... 5
Objective........................................................................................................................................................................... 5
Background ..................................................................................................................................................................... 5
Scope................................................................................................................................................................................. 8
Methodology .................................................................................................................................................................... 8
Compliance Statement.................................................................................................................................................. 9
Detailed Analysis ............................................................................................................................................................. 10
Nonprofit Service Agreements ................................................................................................................................. 10
Lease Agreements ....................................................................................................................................................... 13
Best Practices ............................................................................................................................................................... 16
Audit Results ..................................................................................................................................................................... 18
Finding 1: Nonprofit Service Agreements ............................................................................................................. 18
Recommendation ......................................................................................................................................................... 19
Finding 2: Nonprofit Lease Agreements ................................................................................................................ 19
Recommendation ......................................................................................................................................................... 20
Appendices ........................................................................................................................................................................ 21
Appendix A: The City’s Nonprofit Service Agreements as of June 2021 (FY21 Contract Amount of
$10K or More) ................................................................................................................................................................ 21
Appendix B: The City’s Lease Agreements with Nonprofit Organizations as of August 2021 ............... 24
Appendix C: Prior Year Findings and the Status - “Audit of Nonprofit Service Agreements” dated
August 29, 2019 ............................................................................................................................................................ 29
Appendix D: Management Response ..................................................................................................................... 31
5
Introduction
1 “Annually, the City of Palo Alto receives funds from the U.S. Department of Housing and Urban Development (HUD) to administer the Community
Development Block Grant (CDBG) program. This program funds various nonprofit agencies to implement services that benefit low- and moderate-
income persons and address community development needs.” Community Development Block Grant – City of Palo Alto, CA
2 PPP Reference Guide in the PPP Knowledge Lab administered and maintained by the World Bank Group (PPP Knowledge Lab | PPP Reference
Guide https://pppknowledgelab.org/guide/sections/83-what-is-the-ppp-reference-guide)
3 Sadran, Pierre. "public-private partnership". Encyclopedia Britannica, 25 Sep. 2019, https://www.britannica.com/topic/public-private-partnership.
4 Making the Most of Contractual Collaborations with Community-Based Non-Profits, 2013, https://www.ca-ilg.org/sites/main/files/file-
attachments/making_the_most_of_contractual_collaborations_with_community-based_non-profits_final_7-19-13_0.pdf?1436996039
Objective The purpose of this audit activity was to:
1) Determine whether appropriate policies and procedures are applied
consistently by all departments of City of Palo Alto (the City) for entering into
and monitoring agreements with nonprofit organizations.
2) Determine whether adequate processes and monitoring activities are
implemented to ensure that performance requirements are met by nonprofit
organizations.
Background The City strives to provide services that benefit its citizens. Through various
agreements, the City often supports nonprofit organizations that serve the
community to achieve their mission. Such agreements include grant agreements
(e.g. CDBG1), professional services agreements, general services agreements,
facilities agreements, and lease agreements. The City encourages the formation
of public/private partnerships and has established the Public/Private
Partnerships Policy.
Public-Private Partnership (PPP)
The PPP is defined in the PPP Reference Guide2 as “a long-term contract
between a private party and a government entity, for providing a public asset or
service, in which the private party bears significant risk and management
responsibility and remuneration is linked to performance.”
Although PPPs often use private sector investment to finance infrastructure
projects when public funding is not readily available, there are different types of
PPPs formed to address various needs of governments for many functions.
Unlike a simple contractual relationship such as outsourcing, “a genuine PPP
implies a triadic relationship between the public authority, the private-sector
partner, and members of the public concerned with the service. A PPP is-or
should be-a mutually beneficial agreement directed toward serving social
purpose.”3
Partnerships with community-based organizations are different from typical
contracting services. Partnerships involve a contractual relationship between
organizations with common missions for their mutual benefits. Therefore, it is
important to identify the most suitable partners for the services to be delivered.
Successful partnerships rely on communicating regularly, establishing
expectations, and assessing performance.4 It is important to ensure that
6
5 Public-Private Partnerships (P3s): What Local Government Managers Need to Know by Lawrence L. Martin, PhD, MBA, Professor of Public Affairs,
University of Central Florida, Orlando; A Policy Issue White Paper for ICMA, International City/County Management Association (Public-Private
Partnerships (P3s): What Local Government Managers Need to Know | icma.org https://icma.org/documents/public-private-partnerships-p3s-
what-local-government-managers-need-know)
6 United Nations, 2008 (Guidebook on Promoting Good Governance in Public-Private Partnerships | UNECE https://unece.org/economic-
cooperation-and-integration/publications/guidebook-promoting-good-governance-public)
7 “Joint Venture” under the City’s policy is not the same as a legal joint venture under California partnership laws.
contractual relationships are reflective of the expectations the City holds for all of
its partners. As relationships increase in longevity, this importance is amplified.
The benefits of PPPs are the combination of the private sector with its expertise,
resources, and technology and the public sector with services to the public and
protection of their interest. However, there are some challenges for the public
sector. The procurement and contracting processes for PPPs can be complex.
Citizens may not understand PPPs and criticize a lack of transparency.5
According to the Guidebook on Promoting Good Governance in Public-Private
Partnerships6, one of the challenges a government faces is “instigating the
procedures and processes involved in delivering successful PPPs and
establishing new institutions. Moreover, PPPs require a new type of public
expertise that facilitates projects and monitors their performance.” The
Guidebook also states, “to work well they require well-functioning institutions,
transparent, efficient procedures and accountable and competent public and
private sectors, i.e. ‘good governance’.”
The City’s PPP Policy
The City’s Public/Private
Partnerships Policy (POLICY AND
PROCEDURES 1-25/MGR) dated
August 2007 categorizes
partnerships into three categories
and describes them as follows:
1. “Co-Sponsorships” are the most
common type of PPPs and can take
the form of one-time event or annual
agreements. They are entered into
by staff and normally have no or
minimal financial impact.
2. “Alliances” involve organizations
that have been created for the sole
purpose of supporting a City
program. They do not receive any
direct financial benefit but work
closely and cooperatively with staff to
implement City goals. They are
approved by the City Council if there
are any staffing or budgetary
implications to the partnership.
3. “Joint Ventures”7 involve organizations that have programs or missions
independent of the City and enter into a contractual relationship with the City for
Public/private partnership is an agreement
between the City and a nonprofit or private
organization to provide services or to assist
in funding of public facilities and programs.
Such partnerships may take various forms,
including:
• Acceptance of or solicitation of service
or facility proposals
• Facilitation of such proposals through
the City’s regulatory process
• Waiver of City General Fund fees to
help reduce project costs
• Contributions of City matching funds for
construction of facilities to be owned
and controlled or operated by the City
• Provision of facilities to private partner
at no charge or at a subsidized rent
Source: Public/Private Partnerships Policy (POLICY
AND PROCEDURES 1-25/MGR) dated August 2007
7
8 The Internal Revenue Services’ Exempt Organizations Business Master File Extract data shows that approximately 820 tax-exempt organizations
based in Palo Alto filed tax returns between 2018 and 2021 (as of December 2021). Exempt Organizations Business Master File Extract (EO BMF) | Internal Revenue Service (irs.gov)
mutual benefits. Each joint venture is uniquely negotiated by the staff and
approved by the City Council.
According to the City’s policy, PPPs may be initiated by staff, by City Council, or
by a private/nonprofit organization. A City-initiated partnership may incorporate
incentives, including waiver of non-enterprise fund building and planning fees,
reduced lease rates, and free use of space, that are negotiated on a case-by-
case basis.
The City’s Agreements with Nonprofit Organizations
The City has established partnerships with nonprofit organizations8 in the
administration of services such as senior services, the animal shelter, urban
forestry, local museum, and suicide prevention activities. As of June 2021, there
were 46 nonprofit service agreements with a FY21 contract amount of $10,000
or more, as summarized below. The detailed information is available in Appendix
A.
As the City continues to experience difficult years with limited fiscal resources
and staffing due to the COVID-19 pandemic and on-going recovery, successful
PPPs are significantly important to provide the services and programs that meet
the needs of the public efficiently and carry out the City’s mission in a
sustainable manner.
Lease of City Land/Facilities
The City’s Leased Use of City Land/Facilities Policy (POLICY AND
PROCEDURES 1-11/ASD) dated October 2006 was established to ensure that
City real property is used in the best interest of the Palo Alto citizens and
taxpayers. The development and operation of facilities on City-owned property
should further public use or provide a public benefit. Open competitive and/or bid
Table 1: The City’s Nonprofit Service Agreements as of June 2021 (FY21 Contract Amount of $10K or More)
Responsible Department FY21 Contract Amount # of Nonprofit Agreements
Community Services 1,983,433 7
Community Services/Human Services 1,518,188 14
Planning & Development Services/CDBG 1,300,067 12
Public Works 363,258 3
Transportation 350,000 1
Utilities 324,472 2
Administrative Services 160,000 1
Planning 145,000 1
City Manager 100,000 2
PWD-Watershed Protection 84,795 1
Library 35,000 1
Fire 15,000 1
Grand Total $ 6,379,213 46
8
9 Judgmental sampling is a non-statistical sampling that involves selecting a sample based on auditors’ experience, knowledge, and
professional judgment and is appropriate when auditors do not need to draw conclusions about the population.
processes are used to solicit proposals prior to awarding an Option to Lease (or
Lease), and the information considered includes the following:
• The extent to which the proposed leased use satisfies a public need for
the proposed services and/or uses
• Consistency of the proposed use with existing City goals and objectives
• The impact of the proposed use (traffic impacts, noise impacts, energy
conservation, etc.) upon the immediate neighborhood, the community
generally, and the environment
• The degree of public access
• The history and assessment of the proposed group’s ability to carry out
the construction, if any, and operation of the facility and services as
proposed
There were 32 lease agreements with nonprofit organizations as of August 2021
(Appendix B).
Prior audit findings
The prior audit “Audit of Nonprofit Service Agreements” dated August 29, 2019
reported that, while the Office of Human Services that oversees more than half of
the City’s nonprofit service agreements effectively monitored contractor
performance using an established process and tools, some other departments
did not have an established process or tools, which resulted in undetected errors
and noncompliance. The report listed four recommendations to improve the
City’s oversight of nonprofit service agreements. Management’s corrective
actions were scheduled to be completed by December 2020. Two of four
corrective actions are related to Palo Alto Downtown Business and Professional
Association (PADBPA) and are currently on hold as a result of the onset of the
COVID-19 pandemic. The other two corrective actions were reported as “closed”.
The detailed status of the corrective actions is shown in Appendix C.
Scope The OCA reviewed a sample of 10 out of 46 nonprofit agreements with a FY21
contract amount of $10,000 or more as of June 2021. We also interviewed the
project managers and administrators and reviewed the agreements and related
staff reports as well as the documents used to monitor the performance for the
selected agreements.
Methodology The OCA performed the following procedures:
• Obtained a list of nonprofit agreements from City management.
• Judgmentally9 selected the agreements for review, considering the
responsible department, the contract amount, the prior year audit, and
other criteria.
9
10 Government auditing standards require an external peer review at least once every three (3) years. The last peer review of the
Palo Alto Office of the City Auditor was conducted in 2017. The Palo Alto City Council approved a contract from October 2020
through June 2022 with Baker Tilly US, LLP (Baker Tilly) and appointed Kyle O’Rourke, Senior Consulting Manager in Baker Tilly's
Public Sector practice, as City Auditor. Given the transition in the City Audit office, a peer review was not conducted in 2020 and will
be conducted after the third year of Baker Tilly’s contract.
• Reviewed the selected agreements, relevant staff reports and public
meeting minutes, nonprofit organizations’ websites, relevant policies and
sections of Municipal Code.
• Interviewed the project managers for the selected agreements and
obtained the reports and other documents for performance monitoring.
• Obtained all lease agreements with nonprofit organizations as of August
2021.
• Reviewed all lease agreements provided and summarized the information
for comparison.
Compliance Statement
This audit activity was conducted from June 2021 to April 2022 in accordance
with generally accepted government auditing standards, except for the
requirement of an external peer review10. 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.
The Office of the City Auditor greatly appreciates the support of the Project Managers and Administrators of nonprofit agreements in conducting this audit activity. Thank you!
10
Detailed Analysis
Nonprofit Service Agreements
A list of all nonprofit agreements was compiled by the City departments and included
71 agreements (excluding lease agreements). Some of the agreements were
expired, not relevant to the scope and objectives, or had a FY21 contract amount of
less than $10,000. Ultimately, the population of agreements considered for this
audit activity included 46 nonprofit agreements, each of which had a FY21 contract
amount of more than $10,000 as of June 2021 (Appendix A). As shown in Table 1 in
the Background section, the Community Services Department is responsible for
approximately 50% of nonprofit agreements included in Appendix A.
The OCA selected the 10 nonprofit agreements (Table 2 below) by identifying
agreements with a FY21 contract amount of $100,000 or more and agreements from
various departments that were not reviewed during the previous audit since our
understanding from the previous audit report is that some departments do not have
an established process or tools. The selected agreements included a few
agreements from Community Services Department that were reviewed previously
but covered all departments that had agreements with a FY21 contract amount of
$100,000 or more.
Although most of these agreements were not specifically assigned to the categories
(Co-Sponsorships, Alliances, and Joint Ventures) in the formal documents such as
staff reports to the City Council, these agreements appear to be Joint Ventures due
to the contractual relationship and financial impact.
Many of these organizations have long-term relationships with the City, and the
partnerships were initiated in various ways: three organizations were selected
through the Request for Proposal (RFP) process; four organizations received a sole
source exemption; two organizations were requested by the City Council; and one
organization became a separate entity after being a City-funded project.
• Friends of the Junior Museum and Zoo (Friends) has been supporting the
Junior Museum and Zoo (JMZ) since 1962 and initially approached the City
to raise the capital funds necessary to renovate the JMZ. The City Council
directed staff to enter into a “Joint Venture”11 with the Friends in 2007.
11 CMR: 416.07 dated November 14, 2007 Microsoft Word - CMR 416-07.doc (cityofpaloalto.org)
Table 2: Sample of Nonprofit Organizations by Responsible Department
Responsible Department FY21 Contract
Amount
# of Nonprofit
Agreements
Community Services 1,776,260 3
Community Services/Human Services 477,341 1
Transportation 350,000 1
Public Works 333,258 2
Utilities 308,333 1
Administrative Services 160,000 1
Planning 145,000 1
Grand Total $ 3,550,192 10
11
• Palo Alto Transportation Management Association (PATMA) was created to
support the City’s strategies and entered into a Funding Agreement with the
City in 2016 to address concerns expressed by the City Council.
• Canopy was created12 to support the City's Urban Forestry Section and has
a contract with the City since it became an independent 501(c)3 in 2002. A
sole source exemption was granted pursuant to PAMC 2.30.360(d) due to
lack of adequate substitute or equivalent provider.
• Avenidas received in 2015 a sole source exemption pursuant to PAMC
2.30.360(d), as it is the only provider of comprehensive services to senior
adults in the community. The City transferred its Senior Adult services to the
organization in 1978 and allocated funds in the HSRA13 until 2014. When
Avenidas requested removal from HSRA, the City Council directed staff to
contract directly with Avenidas.
• Project Safety Net (PSN) transitioned from being a City-funded project to a
separate nonprofit organization in 2020. As PSN continues to provide youth
and teens mental wellness support services, the City will provide its financial
support through 2025.
• Downtown Streets Team (DST) has a contract with the City since 2006. A
sole source exemption was granted pursuant to PAMC 2.30.360(d) due to
lack of adequate substitute or equivalent provider capable of outreach to
homeless individuals while providing cleaning services of outdoor spaces.
• MidPen Media Center was designated as the “Access Corporation” in 2001
to operate and administer cable television public, educational, and
government access channels. A sole source exemption was granted
pursuant to PAMC 2.30.360(b)(2) to provide cablecasting, production, and
streaming services as the solicitation of bids would be impracticable due to
the complexity associated with bringing in a new provider.
• Alta Housing (formerly Palo Alto Housing Corporation, or PAHC) has
administered the Below Market Rate (BMR) housing program for the City
since its inception of the program in 1974. Alta Housing was one of two
organizations that responded to a RFP in 2019.
• Ecology Action was awarded a contract from proposals submitted in
response to a RFP in 2014 for energy efficiency services to administer and
deliver a commercial energy savings program.
• Pets In Need (PIN) was awarded a contract in 2019 to provide animal shelter
services. PIN was the only organization that submitted a proposal in
response to RFPs in 2015 and 2016.
12 History - Canopy : Canopy
13 “Human Services Resource Allocation Process (HSRAP) is a grant program open to organizations who deliver direct services to Palo
Alto residents so that they have a safety net of services.” Human Services – City of Palo Alto, CA
12
Having standardized
contract templates is a
best practice to ensure that
contracts are created
efficiently and include all
intended terms and
clauses although there are
no identical contracts as all
services provided by these
organizations are unique
and each department
administers own contracts.
The following five
contracts’ structures are
almost the same: Canopy
(Public Works), Project
Safety Net (Community
Services), Alta Housing
(Planning), Ecology Action
(Utilities), and Pets In
Need (Community
Services). The remaining
contracts for review are
also very similar but
include fewer sections
and/or different section
titles than those five
contracts (as some of them
are unique, i.e. Funding
Agreement, older
agreement, etc.), but
several key sections (such
as Indemnity, Assignment,
Nondiscrimination) are
included in almost all
contracts.
The Scope of Services and
Schedule of Performance
are usually included in
Exhibit A and Exhibit B,
respectively. Scope of
Services is where
expectations such as goals, activities, deliverables, and periodic reporting
requirements are defined. The agreements for Canopy (Public Works), Avenidas
(Community Services), PSN (Community Services),PIN (Community Services),
Ecology Action (Utilities), and PATMA (Transportation) list specific performance
expectations and reporting requirements that tie to the reports, which enable the City
to monitor performance.
Example – Project Safety Net
Recitals
Agreement Sections
1. Scope of Services
2. Term
3. Schedule of Performance
4. Not to Exceed Compensation
5. Invoices
6. Qualifications/Standard of Care
7. Compliance with Laws
8. Errors/Omissions
9. Cost Estimates
10. Independent Contractor
11. Assignment
12. Subcontracting
13. Project Management
14. Ownership of Materials
15. Audits
16. Indemnity
17. Waivers
18. Insurance
19. Termination or Suspension of Agreement or Services
20. Notices
21. Conflict of Interest
22. Nondiscrimination
23. Environmentally Preferred Purchasing and Zero
Waste Requirements
24. Compliance with Palo Alto Minimum Wage Ordinance
25. Non-Appropriation
26. Prevailing Wages and DIR Registration for Public
Works Contracts
27. Miscellaneous Provisions
Exhibit
A. Scope of Services
B. Compensation
C. Insurance Requirements
D Use of Premises
13
The City has individuals serving as liaisons with the board of directors of some of the
nonprofit organizations, which helps the City understand the nonprofit partners and
communicate better.
• The Friends – The contract requires City’s liaison(s) to the Friends board of
directors and/or any board committees. The staff liaison and City Council
liaison attend the board meetings.
• PSN – The Project Manager is an ex-officio director of the PSN board of
directors. The City’s Community Services Department and Human Relations
Commission are also members of PSN’s Partners Council.
• Avenidas – There is a City Council liaison to the Avenidas’ board of directors.
• PATMA – A City representative is a member of the PATMA board of
directors. The staff liaison and City Council liaison attend the board
meetings.
In recent years, there were some unfortunate evets that required and will require the
City and the relevant nonprofit organizations to work together to address:
• DST faced lawsuits and complaints from former employees about workplace
culture in 2010s. When the existing contract expired in November 2020, City
Council approved a one-year (instead of three-year) contract after asking
about alternative vendors and policy development, and directed staff to
obtain documents related to governance from DST. In May 2021, DST
provided the City with the documents including revised board bylaws,
employee handbook and managers manual. The City's HR Director reviewed
the documents and concluded that they were satisfactory. In December
2021, the City Council approved the amendment No. 1 that extend the
contract term by two years, through January 11, 2024.
• Soon after the City’s investigation of a tragic incident involving PIN
employees was concluded, PIN sent a letter to the City in November 2021 to
provide one year's formal notice to terminate the agreement. In this letter,
PIN noted the City's failure to meet some of the timelines for the construction
and renovation projects specified in the Agreement. The Director of the
Community Services Department presented to the City Council in February
2022 that the following projects (totaling $1.8M) have been completed:
Medical suite design and construction; Modular building purchase and site
prep; New kennel building design; and Existing kennel renovation re-design.
She also presented that New Kennel building construction (over $2M) has
not been completed. PIN now has a new Interim Executive Director and is
negotiating with the City for a new or amended agreement.
The City’s Public/Private Partnerships Policy (POLICY AND PROCEDURES 1-
25/MGR) mentions subsidized rent. Out of 10 agreements reviewed, the following
three organizations whose agreements are administered by Community Services
Department had a separate lease agreement with $1 annual rent: The Friends, PSN,
and Avenidas. The remaining contracts selected for review did not have any lease
agreement with the City.
Lease Agreements
The City’s Real Estate and Property Management division in the Administrative
Services Department provided copies of all lease agreements with nonprofit
14
organizations as of August 2021. The OCA created a table listing 32 lease
agreements for comparison, as shown in Appendix B.
Out of the 32 lease agreements, there are seven agreements with $0 rent and five
agreements with annual rent of $1 (Table 3 below). The OCA calculated the total
annual market rent of these 12 properties to be $30M based on the CoStar
Submarket Reports generated by the City's Real Property Manager, at the request
of OCA, in August 2021. Lease terms such as a security deposit and utility
payments vary from agreement to agreement.
Table 3: The City’s Lease Agreements with Nonprofit Organizations as of August 2021 (Annual Rent of $1 or Less)
Organization-
Tenant Location
Separate
Service Agreement Non-monetary public benefits
Annual
Rent (2021)
Estimated
Annual Market Rent Value*
The Elizabeth
Gamble Gardens
Gamble
Property No
Development and operation of a public
garden center to provide horticultural
classes and library, demonstration
gardens, etc.
$ - $ 6,648,476
Community
Skating, Inc.
Winter
Lodge No Upgrade, maintain, and operate a public
ice skating facility and ancillary services $ - $ 10,782,106
The Stanford Area
Council Boy Scouts of America
Lucie Stern No Provide a beneficial service to the youth and community $ - $ 149,045
Friends of Palo
Alto Library
(Ground Lease
2009)
Cubberley Yes
Rent is waived in consideration of
SUBLESSEE's continued book and other
Library sales which benefit and provide
funds for Palo Alto Public Libraries
$ - $ 331,800
Friends of Palo
Alto Library (Ground Lease 2010)
Cubberley Yes
Rent is waived in consideration of
LESSEE's continued book and other Library sales and LESSEE's mission to provide funds for City Libraries
$ - $ 331,800
Palo Alto
Community Child
Care
Ventura Yes Provide child care related uses, services
and activities $ - $ 1,393,560
Palo Alto Community Child Care
College Terrace Yes Provide child care related uses, services and activities $ - $ 132,720
Museum of American Heritage
Williams property No Operate a historical museum and a park open to public $ 1 $ 435,653
Environmental
Volunteers
Sea Scout
Base Yes
Perform the project by developing and
operating a facility to house EV's offices
and programs and to provide various
educational and training programs
$ 1 $ 579,522
PROJECT
SAFETY NET
Cubberley Yes
Provide support services to organizations
and individuals dedicated to youth
wellbeing and suicide prevention.
$ 1 $ 31,123
Avenidas 2015 Downtown Yes
Provide support services to older adults
and their caregivers; a broad range of
activities and services responsive to the
interest and needs of senior citizens
$ 1 $ 1,154,664
Friends of Junior
Museum and Zoo
JMZ Yes Construct the project in full compliance
with the Facilities Agreement
$ 1 $ 7,963,200
* OCA estimated the annual rent market values by multiplying the size of entire property listed in the leasing
agreement by the average monthly market rent of $5.53 per sq.ft. that was multiplied by 12 months. OCA
calculated average monthly market rent of $5.53 sq.ft. for Palo Alto using the monthly market rent values listed in
the CoStar's Submarket Reports for Palo Alto Downtown (Office, Retail, Industrial) and Palo Alto (Office, Retail,
Industrial) that were generated by the City's Real Property Manager, at the request of OCA, on Aguste 23, 2021.
Therefore, the calculated market rent values may be significantly different from the actual market values as of
August 2021.
15
For the 20 leases with annual rent over $1, the total annual rent is $765,500, which
is 10% of the estimated total annual market rent (see the Note 4 below the table in
Appendix B). These nonprofit organizations provide Palo Alto citizens with a variety
of services such as childcare, education, and recreational activities.
The OCA compared some of the terms among lease agreements and noted the
following variances:
Utility payments tend to be made by many of the nonprofit organizations with annual
rent of $1 or less. Utility payments are made by the City for the most of lease
agreements with annual rent over $1.
Maintenance
• City is responsible for maintenance and repair of the structure (20 of 32
agreements)
• Tenant is to perform all maintenance and repairs (10 agreements)
• City and Tenant work in cooperation to develop capital improvement related
items (2 agreements)
Rent increases are determined based on one of the following two method as
described in each agreement:
• Annual adjustment based on Consumer Price Index (13 of 20 agreements)
• Annual percentage (2-3%) increase (7 of 20 agreements)
Late charges may be applied when tenants do not make payments on time. Late
fees are determined in various ways. Many agreements require to pay a late charge
equal to five percent of the overdue rent if rent is not paid within 10 days after the
due date. The variation of this method is as follows:
• 5% after 10 days (11 of 20 agreements)
• 6% after 10th day + $100 (4 agreements)
• 6% after 5 days plus interest at 12% from the 5th day (2 agreements)
• Charges (based on a schedule of charges) after 10th day and additional
charges every 30 days (2 agreements)
• No late charge (1 agreement)
Holding Over clause allows a month-to-month tenancy after the term of the lease
has expired. Under this clause, a month-to-month tenancy is subject to all terms and
conditions of the lease agreement. There are 18 lease agreements using this
clause.
• Four lease agreements expired in 2009
• Two lease agreements expired in 2014
• One lease agreement expired in 2015
• One lease agreement expired in 2017
• Nine lease agreements expired in 2019
• One lease agreement expired in 2020
16
Best Practices According to the Guidebook on Promoting Good Governance in Public-Private
Partnerships, governance is defined as “the process in government actions and how
things are done, not just what is done”, and good governance involves the following
six key principles:
• Participation – Involvement of all stakeholders
• Decency – Development and management of rules without harming people
• Transparency – Clarity and openness in decision-making
• Accountability – Responsibility of individuals political power to society
• Fairness – Equal application of rules to everyone in society
• Efficiency – Use of limited human and financial resources without waste,
delay, corruption, or burden on future generations
Throughout the OCA’s research around best practices of partnerships with nonprofit
organizations, relevant case studies, and articles, there were a number of themes
that were present across multiple sources. The OCA identified the common risks
and best practice elements listed below for administering and managing contracts
with nonprofit organizations.
Common risks associated with nonprofit agreements
• Lack of transparency resulting from inconsistent contract administration and
management
• Poor performance or noncompliance with requirements
• Negative financial impact of operational inefficiencies
• Failure to provide the intended services to the public
• Reputational damage done to the City based on actions of a nonprofit
partner
• Limited nonprofit service providers or alternatives
Clear policies and procedures It is important that cities ensure that there are clear
guidelines and policies associated with entering into any sort of partnership or
contract with nonprofit organizations. These policies should prevent much of the
uncertainty in determining with whom a city should partner. Additionally, clear
policies and procedures mitigate the risk for disparate treatment from one nonprofit
organization to the next. Finally, nonprofits can rely on these policies and
procedures to ensure that they are not at risk for losing certain benefits without
ample notice. For example, if a nonprofit organization is currently receiving the
benefits of a $1 annual lease, it should be clear to the nonprofit when that lease
would be expiring or when the organization is no longer eligible for that benefit from
a city.
Measurable goals Cities should be clear about the performance they expect from
nonprofits. When administering an agreement, a city should understand what is
necessary in terms of performance from the nonprofit partner. Performance goals
and key performance indicators should be clearly measurable and defined in an
agreement. This allows cities to enter into agreements that allow termination of
partnerships without ambiguity. If a nonprofit partner is underperforming against
17
clear performance goals, cities can identify associated risks and actions to be taken
in a timely manner. This also provides visibility for those nonprofit partners who are
performing extraordinarily well.
Regular evaluations It is not enough to have clear policies and measurable goals.
Cities also need to ensure that nonprofit partners are continually performing against
those measurable goals through regular evaluations. Each nonprofit’s evaluations
will look different. This could be primarily financial reports, or perhaps there are
measurable operational goals, but, in any case, cities should ensure that these
partners are regularly being compared against their measurable goals. If the regular
evaluations are going well, cities have the peace of mind in knowing that their
resources are being stewarded well. If the regular evaluations expose issues, cities
should have clear policies and procedures to determine next steps.
The City of Palo Alto has a number of partnerships and contracts with nonprofit
organizations. In order to have a clear understanding as to whether or not the
resources and/or benefits exchanged with them are in the best interest of Palo Alto
citizens, the City should ensure that all three elements listed above are in operation.
These elements help to mitigate the risk of wasted resources on underperforming
organizations or even benefit from additional agreements with high performing
organizations. Good governance would help the City navigate difficult decisions to
achieve the City’s goals.
18
Audit Results
Finding 1: Nonprofit Service Agreements
It is important for the City to assess and monitor performance of nonprofit
organizations to ensure that the intended services are provided to the City and/or
to citizens efficiently and effectively. In many of the 10 nonprofit service
agreements the OCA reviewed, the Scope of Services section included the City’s
expectations such as goals, expected activities, performance measures,
deliverables, and periodic reporting requirements. However, the following Scope
of Services did not include adequate information on performance expectations:
• For Palo Alto Housing Corp, periodic reporting requirements are not
defined in the agreement although the City expects to receive quarterly
and yearly reports (as stated in Staff Report ID #12212).
• For Downtown Streets Team, the Scope of Services includes services to
pick up litter, but the reporting requirements did not include any
information related to litter pickup (although the actual monthly report
includes the litter pickup data). All requirements relate to outreach.
• For Pets in Need, the City does not have an updated Disaster
Preparedness Plan, for which the deadline is not clearly stated in the
Agreement.
For the required reports and deliverables, the following instances of
noncompliance were noted:
• For Pets In Need, all monthly reports the OCA reviewed did not include
the information required in the agreement.
• For Project Safety Net, the December 31, 2021, report has not been
completed more than two months beyond due date (as of April 2022). In
addition, the June 2021 report showed two unmet outcome measures
(due to the pandemic and resource shortage, according to the Project
Manager). The Project Manager stated that less attention was paid to
monitoring the compliance with the agreement due to limited staffing and
a shift in priorities during the pandemic.
• For Ecology Action, the Monthly Report and supporting documentation to
be submitted in conjunction with each invoice are not available because
the Project Manager who was monitoring this contract retired in August
2021 and the Key Account Manager was not able to find the documents.
The responsibilities the City is required to perform are also included in some
agreements. For Pets in Need, the “failure of the City to meet the timelines for
the construction and renovation projects specified in the Agreement” was noted
in the PIN’s Nov-15-2021 letter to the City to provide a termination notice.
As discussed in the Best Practices section of this report, without good
governance, the City may not manage risks effectively to achieve the City’s goals
and serve the best interest of its citizens.
19
14 Agreements with high risk have more possibility that adverse events occur and more effects that are unfavorable, such as failure, injury, loss, and
bad reputation. Management should assess risks related to each nonprofit agreement to determine the adequate resources, processes, etc. to monitor the agreement.
Recommendation All nonprofit agreements should consistently define the service level expectations,
including the goals, performance measures, and reporting requirements that enable
the City to monitor the performance of the nonprofit organizations and achievement
of intended benefits. The higher the risk associated with an agreement, the more
refined the performance and reporting expectations should be. The City should also
ensure that appropriate City resources are assigned to high-risk14 agreements to
manage such contracts and relationships adequately. Underperformance should be
discussed with the organizations before it becomes an issue, and appropriate
corrective actions should be taken to improve performance.
Additionally, the City should ensure that the City’s responsibilities to be included in
the agreements are achievable before agreements are signed to avoid
noncompliance with the requirements.
Furthermore, the City should track the performance of nonprofit organizations and
the City to identify the risks associated with continuing the relationships (e.g. risk of
not achieving the goals, reputation risk) and discontinuing the relationships (e.g. risk
of not finding alternatives) and take appropriate actions to address the risks in a
timely manner. The staff should maintain a list of all nonprofit agreements and
periodically report to the City Council on performance of nonprofit organizations and
any issues identified, resolved, and outstanding as appropriate.
Finding 2: Nonprofit Lease Agreements
The City enters into lease agreements as a means of supporting nonprofit
organizations in the community. The OCA obtained all lease agreements the City
had with nonprofit organizations as of August 2021 and compared the terms.
Nonprofit organizations that lease the City-owned properties are required to provide
appropriate consideration that includes non-monetary benefits, according to the
Lease Use of City Land/Facilities Policy. A half of 12 lease agreements with annual
rent of $1 or less have separate service agreements that are administered by the
City’s project managers from the applicable City departments. For the six
agreements without separate service agreements, the following was noted as to the
service and performance requirements:
• Two agreements include the “Required Services and Uses” section that
provides a brief description of services to be provided on the premises
but does not include performance expectations or measures.
• Two agreements include the “Use of Property” section that briefly
describes the required uses. There are additional sections such as
Independent Contractor, Conflict of Interest, and Non-Discriminations that
are usually included in the professional services agreement, but no
performance expectations or measures are included.
• One agreement includes the “Use” section that provides a brief
description of the requirements and the “Annual Report” section that
require the nonprofit organization to annually submit a report containing
all activities and programs planned for the upcoming year. However, no
performance expectations or measures are included.
20
• One agreement includes the “Use of Property” section that provides a brief
description of services to be provided on the premises and the requirements to
present to the City a budget and a report of the operations annually. However, no
performance expectations or measures are included.
Although the Leased Use of City Land/Facilities Policy (POLICY AND
PROCEDURES 1-11/ASD) provides guidance on entering lease agreements, it
does not discuss the process to ensure that the intended services are provided on
the premises. Monitoring performance would help the City understand the
nonprofits’ ability to deliver the benefits to the citizens and determine the
appropriate rental value (including month-to-month rent amounts) when renewing a
leasing agreement.
Additionally, this policy requires that the estimated fair market rental value be
considered to determine the rent amounts and that the proposed non-monetary
public benefits be clearly articulated. However, during this audit, the City’s Real
Estate Division was not able to show the estimated fair market rental values and
non-monetary benefits given to the City. Understanding actual benefits to the
citizens in exchange for the City’s non-monetary support when entering into or
renewing a lease agreement would help the City ensure that lease agreements are
written in the best interest of the City.
Without analyzing the City’s non-monetary support using the fair market rental value
and without defining and monitoring the performance of nonprofit organizations, the
City cannot ensure that it receives adequate compensation from leasing the City-
owned properties.
Recommendation Lease agreements with significantly reduced rent amounts should include
performance and reporting requirements to ensure the City receives the expected
services, if there are no separate agreements for the services provided on the
premises. Depending on the risks associated with an agreement, the City may
need to assign a project manager, a liaison and/or a relationship manager from the
appropriate City department(s) to monitor the performance. The actual benefit to the
City should serve as a basis for reduction of the rent amounts when lease
agreements are renewed.
As required by the City’s policy, the City’s non-monetary support should be
analyzed based on the estimated fair market rental value and non-monetary
benefits to be provided by nonprofit organizations to determine the appropriate
compensation for their use of the City-owned properties and to ensure transparency
and fairness in allowing rent amounts below the market value.
21
Appendices
Appendix A: The City’s Nonprofit Service Agreements as of June 2021 (FY21 Contract Amount of $10K or More)
No. Nonprofit Organization
Name
Current
Contract
Start DATE
Current
Contract
End DATE
Total Contract
Amount
FY21 Contract
Amount Responsible Department Purpose
Reviewed
during 2018
Audit
Lease¹
Reviewed
during
this audit
1 Abilities United 7/1/19 6/30/21 $55,101/yr $55,101 Community Services
/Human Services HSRAP - Disability services. Yes No No
2 Acterra 4/8/16 6/30/21 $30,000/yr $30,000 Public Works Irrigation, maintenance, and
reporting. No No No
3 Adolescent Counseling
Services - Outlet 7/1/19 6/30/21 $45,261/yr $45,261 Community Services
/Human Services
HSRAP - Services to lesbian, gay, bisexual, transgender, queer and
questioning (LGBTQQ) youth and their straight allies. No No No
4 Alta Housing (formerly Palo
Alto Housing Corp) 7/1/19 6/30/21 $31,949/yr $31,949 Community Services
/Human Services HSRAP - Various program for low-income youth and seniors. No No No
5 Association for Energy
Affordability, Inc. 5/1/19 6/30/22 $85,000 $16,139 Utilities Heat pump retrofit No No No
6 Avenidas 7/1/20 6/30/25 $2,626,165 $477,341 Community Services
/Human Services Senior programs (formerly part of HSRAP). Yes Yes Yes
7 Canopy 12/7/20 12/6/21 $225,510 $225,510 Public Works Urban forestry professional services, outreach, and education. No No Yes
8 Counseling & Support Services for Youth (CASSY) 7/1/19 6/30/21 $45,261/yr $45,261 Community Services /Human Services HSRAP - Mental health support on Palo Alto Unified School District secondary school campuses. Yes No No
9 Downtown Streets 7/1/20 6/30/21 $236,000 $236,000 Planning & Development
Services/CDBG
Workforce Development Program. Provide comprehensive support
services for homeless/ unemployed to secure employment. No No No
10 Downtown Streets 7/1/20 6/30/21 $100,000 $100,000 Planning & Development Services/CDBG
Pre-packed groceries will be delivered to doorsteps to medically
vulnerable low-income Palo Alto residents to meet the need and limit
contact.
No No No
11 Downtown Streets Team 12/7/20 12/6/23 $323,244 $107,748 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); Yes No Yes
12 Downtown Streets Team 7/1/19 6/30/21 $38,786/yr $38,786 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 No No
13 DreamCatchers 7/1/19 6/30/21 $26,624/yr $26,624 Community Services
/Human Services
HSRAP - Tutoring for low income
middle school students. No No No
14 Ecology Action 6/30/15 6/30/21 $925,000 $308,333 Utilities Commercial/Key Account Energy Efficiency. No No Yes
22
No. Nonprofit Organization Name
Current
Contract
Start DATE
Current
Contract
End DATE
Total Contract Amount FY21 Contract Amount Responsible Department Purpose
Reviewed
during 2018
Audit
Lease¹
Reviewed
during
this audit
15 Empowerment Institute 9/3/18 12/31/21 $70,000 $70,000 City Manager Empowerment Institute assist City with advancement of community
engagement block program. No No No
16 Environmental Volunteers 7/1/21 6/30/22 $24,626 $24,626 Community Services Managing a Trail Ambassador Program at Foothills Nature Preserve No Yes No
17 Friends of the Junior
Museum and Zoo² 2/5/18 11/12/21 $5,300,540 $1,000,000 Community Services Facility agreement for construction of the JMZ No Yes Yes
18 Grassroots Ecology 7/1/17 6/30/22 $75,720/yr $75,720 Community Services Habitat Restoration at Pearson Arastradero Preserve. No Yes No
19 Grassroots Ecology 7/1/18 6/30/23 $56,827/yr $56,827 Community Services Habitat restoration at Foothills Nature Preserve No Yes No
20 Grassroots Ecology 3/4/19 3/4/22 $254,385 $84,795 PWD-Watershed
Protection
School outreach and creek
monitoring. No No No
21 Kara 7/1/19 6/30/21 $23,249/yr $23,249 Community Services
/Human Services HSRAP - Grief support. No No No
22 La Comida 7/1/19 6/30/21 $49,386/yr $49,386 Community Services
/Human Services HSRAP - Nutrition program for
persons 60 years of age or older. Yes No No
23 LifeMoves 7/1/19 6/30/21 $84,039/yr $84,039 Community Services
/Human Services
HSRAP - Food services for homeless and very low-income Palo Alto
residents. Yes No No
24 LifeMoves 7/1/20 12/31/21 $294,000 $294,000 Planning & Development
Services/CDBG
Rent Relief Assistance. To assist low, very low, and extremely low income
persons (per HUD definitions) by providing financial assistance to cover
rent.
No No No
25 LifeMoves 1/1/21 6/30/21 $54,332 $54,332 Planning & Development
Services/CDBG
Longer hours of operation at Hotel De Zink
emergency shelter during the COVID-19 emergency. No No No
26 LifeMoves 7/1/20 6/30/21 $29,932 $29,932 Planning & Development
Services/CDBG
Opportunity Services Center. Provide
comprehensive, one-stop, multi-service day drop-in center for critical
homeless services.
No No No
27 May View Community
Health 7/1/20 6/30/21 $67,610 $67,610 Planning & Development
Services/CDBG COVID-19 Testing and PPE Supplies No No No
28 Mayview Health
Center 7/1/19 6/30/21 $42,599/yr $42,599 Community Services
/Human Services HSRAP - Health services for low income, uninsured Palo Alto residents. No No No
29 MidPen Media Center 7/1/2020 6/30/2023 $800,000 $160,000 Administrative Services Cablecasting, production and streaming services No No Yes
30 Neighbors Abroad 9/30/19 12/31/21 $30,000 $30,000 City Manager
Neighbors Abroad provides administrative support to help with website
communications, social media, finance and other admin responsibilities in
relation to the City's (8) Sister Cities.
No No No
31 Palo Alto Community Child
Care 7/1/20 6/30/25 $2,660,566 $483,592 Community Services
/Human Services
Management of City's childcare subsidy program (formerly part of
HSRAP). Yes Yes No
32 Palo Alto Historical
Association 6/27/16 6/30/21 $35,000 $35,000 Library Management of the City’s archives and facilitate public access to
information and materials relating to the City. No No No
23
No. Nonprofit Organization Name
Current
Contract
Start DATE
Current
Contract
End DATE
Total Contract Amount FY21 Contract Amount Responsible Department Purpose
Reviewed
during 2018
Audit
Lease¹
Reviewed
during
this audit
33 Palo Alto Housing
Corporation 7/1/20 6/30/21 $29,931 $29,931 Planning & Development
Services/CDBG
SRO Resident Support. Provide in-house SRO Service Coordinator for
support counseling, employment assistance and crisis intervention. No No No
34 Palo Alto Housing Corp 7/1/19 6/30/21 $290,000 $145,000 Planning Below Market Rate administration. No No Yes
35 Palo Alto Transportation
Management Association 11/30/20 7/1/23 Based on annual budget submitted to Council $350,000 Transportation Serving as Transportation Management Association for Palo Alto. Yes No Yes
36 Pets In Need 1/15/19 1/15/24 $56,355/mo $676,260 Community Services Operating and Management Agreement to operate the Animal Shelter No No Yes
37 Project Safety Net 9/1/20 6/30/25 $521,604 $100,000 Community Services Resource provider for youth and teen mental health No Yes Yes
38 Project Sentinel 7/1/19 6/30/21 $65,000/yr $65,000 Community Services
/Human Services Landlord-Tenant Mediation Program (formerly part of HSRAP). Yes No No
39 Project Sentinel 7/1/20 6/30/21 $37,480 $37,480 Planning & Development Services/CDBG Fair Housing Services. Provide fair housing services including complaint investigation, counseling, advocacy and community education No No No
40 Ravenswood Family Health
Network 7/1/20 6/30/27 $354,550 $354,550 Planning & Development
Services/CDBG Mobile Health Clinic COVID-19 Testing Project. No No No
41 Silicon Valley Independent
Living Center 7/1/20 6/30/21 $75,000 $75,000 Planning & Development
Services/CDBG
Rent relief assistance for Palo Alto residents with disabilities, veterans and
older adults, aged 55 and over. No No No
42 Silicon Valley Independent Living Center 7/1/20 6/30/21 $11,232 $11,232 Planning & Development Services/CDBG Housing and Emergency Services. Assist low-income individuals and families in search for affordable, accessible housing. No No No
43 Stanford Hospital and
Clinics 2/6/20 2/5/22 $45,000 $15,000 Fire Medical oversight for ambulance transport services. No No No
44
Theatre Partner Agreements
(West Bay Opera, Palo Alto
Players, TheatreWorks)³
7/1/2021 6/30/2022 $50,000 $50,000 Community Services Facility agreements for use of Lucie Stern Theatre and payment of ticket surcharge to City ($4/ticket sold). No No No
45
Youth Community Services
(Youth Connectedness
Initiative)
7/1/20 6/30/21 $50,000/yr $50,000 Community Services /Human Services Funding for the Youth Connectedness Initiative. No No No
46 YWCA of Silicon Valley 7/1/20 6/30/21 $10,000 $10,000 Planning & Development Services/CDBG Rent Relief Assistance for Palo Alto individuals and families experiencing domestic violence. No No No
1 Identified the nonprofit organizations with a lease agreement. See Appendix B for the list of lease agreements. SOURCE: City Departments
2 The contract date and amount information provided by City management included only for the first amendment. The OCA updated the information to include the entire contract (both original contract and the first amendment). OCA calculated the total
contract amount by adding all amounts listed in the City Contributions section (Exhibit D) and the City’s Added Contribution of $1M shown in the first amendment
3 The information provided by the City management was the amount the City recovers from the tickets sold ("$4/ticket sold"). The Resource Impact described in Staff Report ID# 9684 is that the ticket surcharge is expected to "bring in approximately
$90,000 per year to offset operational costs.....Direct departmental operating expenses are currently approximately $60,000 per year, utilities are an additional $40,000, and janitorial costs are another $40,000." Therefore, the OCA added the amount of
$50,000 ($140,000 - $90,000) for FY21 contract amount.
24
Appendix B: The City’s Lease Agreements with Nonprofit Organizations as of August 2021
No.
Organization
-Tenant [Note 1]
Location
Separate
Service
Agreement
Non-monetary public
benefits
Current Lease
Terms
(Years)
Lease
Start
Date
Lease End
Date [Note 2]
A
Total
Space
Leased
in Sq. Ft.
B
Annual Rent
(2021) [Note 3]
C
Estimated Annual
Rent Market Value [Note 4]
[$5.53*12*A]
D
Estimated Annual
Market Rent
Variance
[B-C]
Security
Deposit Utilities Maintenance Property
Taxes
1
The
Elizabeth
Gamble
Gardens
Gamble
Property No
Development and
operation of a public
garden center to
provide horticultural
classes and library,
demonstration
gardens, etc.
51 31-Aug-
1987
31-Aug-
2038
100,188 $ -
$ 6,648,476 $ (6,648,476) $ 5,000 Tenant pays for
all utilities
Tenant perform
all maintenance
and repairs
Tenant is
responsible
for all taxes
and
assessments
2 Community
Skating, Inc.
Winter
Lodge No
Upgrade, maintain,
and operate a public
ice skating facility
and ancillary
services
50 26-Jan-
1990
1-Jan-
2040
162,479 $ -
$ 10,782,106 $ (10,782,106) $ 5,000 Tenant pays for
all utilities
Tenant perform
all maintenance
and repairs
Tenant is
responsible
for all taxes
and
assessments
3 Dance
Action Cubberley No
Office, dance studio,
instruction and
rehearsal uses
Month
to
Month
1-Jan-
2005
31-Dec-
2009
3,130 $ 52,824
$ 207,707
$ (154,883) $ 2,000
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
4
Hua Kuang
Reading
Room
Cubberley No
Office, dance studio,
instruction and
rehearsal uses
Month
to
Month
1-Jan-
2005
31-Dec-
2009
672 $ 11,472
$ 44,594
$ (33,122)
$ 712
City furnishes reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
5 Zohar 2006 Cubberley No
Office, dance studio,
instruction and
rehearsal uses
Month
to
Month
1-Jan-
2005
31-Dec-
2009
3,740 $ 66,696
$ 248,186
$ (181,490) $ 4,000
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
6
The
Children's
Pre-School
Center
Cubberley No Office and child care
uses
Month
to
Month
1-Aug-
2005
31-Jul-
2009
8,772 $ 33,624
$ 582,110
$ (548,486) $ 10,262
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is responsible for
maintenance and
repair of the
structure
Tenant is responsible
for all taxes
and
assessments
7
California
Pop
Orchestra
Cubberley No Provide office and
meeting space
Month
to
Month
1-Oct-
2016
31-Dec-
2019
720 $ 16,203
$ 47,779
$ (31,576) $ 1,200
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
25
No.
Organization
-Tenant [Note 1]
Location
Separate
Service
Agreement
Non-monetary public
benefits
Current
Lease
Terms
(Years)
Lease
Start
Date
Lease
End
Date [Note 2]
A
Total
Space
Leased
in Sq. Ft.
B
Annual Rent
(2021) [Note 3]
C
Estimated Annual
Rent Market Value [Note 4]
[$5.53*12*A]
D
Estimated Annual
Market Rent
Variance
[B-C]
Security
Deposit Utilities Maintenance Property
Taxes
8
Living
Wisdom
School
Cubberley No
Provide education to
9th through 12th
grades
Month
to
Month
1-Oct-
2016
31-Dec-
2019
1,320 $ 29,706
$ 87,595
$ (57,889) $ 2,700
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
9 Reach
Program Cubberley No
Provide office and
rehabilitation
services for stroke
survivors
Month
to
Month
1-Oct-
2016
31-Dec-
2019
3,000 $ 25,184
$ 199,080
$ (173,896) $ 1,000
City furnishes
reasonable quantities of
utilities except
telephone
services
Operate Mon.
through Fri,
during the hours
of 8am to 2pm
7 reserved
parking spaces
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
10 Brainvyne Cubberley No Provide office and meeting space
Month
to
Month
1-Nov-2016 31-Dec-2019 720 $ 16,203 $ 47,779 $ (31,576) $ 1,200
City furnishes
reasonable
quantities of utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
11 Palo Alto
Soccer Club Cubberley No Provide office and
meeting space
Month
to
Month
1-Nov-
2016
31-Dec-
2019
954 $ 21,472
$ 63,307
$ (41,835) $ 1,600
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
12 Dance Magic Cubberley No
Provide dance studio
for dance education
and performing arts
Month
to
Month
1-Dec-
2016
31-Dec-
2019
1,008 $ 26,688
$ 66,891
$ (40,203) $ 2,016
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
13 Minority TV Cubberley No
Provide multicultural
and multilingual
programing;
Education and
Instruction
Month
to
Month
1-Jan-
2017
31-Dec-
2017
1,685 $ 15,233
$ 111,817
$ (96,584) $ 1,180
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
14 West Valley
Flying Club Airport No
Operate a flight
training and ground
school; Provide
5 1-Jul-
2017
30-Jun-
2022
3,227 $ 259,735
$ 214,144 $ 45,591 $ 10,996 Tenant pays for
all utilities except
City and Tenant
work in
cooperation to
Tenant is
responsible
for all taxes
26
No.
Organization
-Tenant [Note 1]
Location
Separate
Service
Agreement
Non-monetary public
benefits
Current
Lease
Terms
(Years)
Lease
Start
Date
Lease
End
Date [Note 2]
A
Total
Space
Leased
in Sq. Ft.
B
Annual Rent
(2021) [Note 3]
C
Estimated Annual
Rent Market Value [Note 4]
[$5.53*12*A]
D
Estimated Annual
Market Rent
Variance
[B-C]
Security
Deposit Utilities Maintenance Property
Taxes
commercial
Aeronautical
Activities (aircraft
maintenance and
flight training)
for garbage and
recycling services
develop capital
improvement
related items
and
assessments
15
Palo Alto
Humane
Society
Cubberley No
Provide
administrative
services for all field program invention,
advocacy, and
education
Month
to
Month
15-Jul-2020 14-Jul-2025 400 $ 5,259 $ 26,544 $ (21,285) $ 876
City furnishes
reasonable
quantities of utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
16 Stanford
Flying Club Airport No
Operate a flight
training and ground
school; Provide
commercial
Aeronautical
Activities (flight
training, aircraft
rental, facilitation
thereof)
Month
to
Month
20-May-
2021 N/A
530 $ 26,982
$ 35,171
$ (8,189) $ 1,193
Tenant pays for
all utilities except
for garbage and
recycling services
City and Tenant work in
cooperation to
develop capital
improvement
related items
Tenant is
responsible
for all taxes
and
assessments
17
The Stanford
Area Council
Boy Scouts
of America
Lucie
Stern No
Provide a beneficial
service to the youth
and community
50 8-Dec-
1978
7-Dec-
2028
2,246 $ -
$ 149,045
$ (149,045) $ - Tenant pays for
all utilities
Tenant perform
all maintenance
and repairs
City (Taxes
are not
mentioned in
the
agreement)
18
Palo Alto
Lawn Bowls
Club
Palo Alto
Lawn
Bowls
No
Offer memberships,
classes, recreational
activities
Month
to
Month
1-Jan-
2016
31-Dec-
2020
70,000 $ 13,839
$ 4,645,200 $ (4,631,361) N/A
Tenant pays for
all utilities except
for water
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
19
Museum of
American
Heritage
Williams
property No
Operate a historical
museum and a park
open to public
25 1-May-
2017
30-Apr-
2043
6,565
$ 1
$ 435,653
$ (435,652) $ 5,000 Tenant pays for
all utilities
Tenant perform
all maintenance
and repairs
Tenant is
responsible
for all taxes
and
assessments
20 Environment
al Volunteers
Sea Scout
Base Yes
Perform the project by developing and
operating a facility to
house EV's offices
and programs and to
provide various educational and
training programs
40 23-Oct-
2008
22-Oct-
2048
8,733
$ 1
$ 579,522
$ (579,521) $ 5,000 Tenant pays for
all utilities
Tenant perform
all maintenance
and repairs
Tenant is
responsible
for all taxes
and
assessments
27
No.
Organization
-Tenant [Note 1]
Location
Separate
Service
Agreement
Non-monetary public
benefits
Current
Lease
Terms
(Years)
Lease
Start
Date
Lease
End
Date [Note 2]
A
Total
Space
Leased
in Sq. Ft.
B
Annual Rent
(2021) [Note 3]
C
Estimated Annual
Rent Market Value [Note 4]
[$5.53*12*A]
D
Estimated Annual
Market Rent
Variance
[B-C]
Security
Deposit Utilities Maintenance Property
Taxes
21
Friends of
Palo Alto
Library
(Ground Lease 2009)
Cubberley Yes
Rent is waived in
consideration of
SUBLESSEE's
continued book and
other Library sales
which benefit and provide funds for
Palo Alto Public
Libraries
Month
to
Month
9-Dec-
2009
8-Dec-
2014
5,000 $ -
$ 331,800
$ (331,800) N/A
Sublessee pays
for all telephone,
electricity, and
sewer clearing
service charge for
Relocatable Unit;
City pays for all
other utilities
Tenant perform
all maintenance
and repairs
Tenant is
responsible
for all taxes
and assessments
22
Friends of
Palo Alto
Library
(Ground
Lease 2010)
Cubberley Yes
Rent is waived in
consideration of
LESSEE's continued
book and other
Library sales and
LESSEE's mission to
provide funds for City
Libraries
Month
to
Month
10-Dec-
2010
9-Dec-
2015
5,000 $ -
$ 331,800
$ (331,800) N/A
City pays for all
utilities except for
new or additional
utility installations
Tenant perform
all maintenance
and repairs
Tenant is
responsible
for all taxes
and
assessments
23
Friends of
Palo Alto
Library
(2012)
Cubberley Yes
Space for book
storage,office space
and book and other
Library related sales
Month
to
Month
6-Nov-
2012
31-Dec-
2014
2,496 $ 24,830
$ 165,635
$ (140,804)
$ 500
City furnishes
reasonable
quantities of
utilities
Tenant perform
all maintenance
and repairs
Tenant is
responsible
for all taxes
and assessments
24
Friends of
Palo Alto
Library
(2017)
Cubberley Yes
Space for book
storage,office space
and book and other
Library related sales
Month
to
Month
1-Feb-
2017
31-Dec-
2019
345 $ 3,330
$ 22,894
$ (19,564)
$ 200
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
25
PROJECT
SAFETY
NET
Cubberley Yes
Provide support
services to
organizations and
individuals dedicated
to youth wellbeing
and suicide
prevention.
Month
to
Month
26-Oct-
2020
25-Oct-
2025
469
$ 1
$ 31,123
$ (31,122) $ 1,400
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
26 Avenidas
2015 Downtown Yes
Provide support
services to older
adults and their
caregivers; a broad
range of activities
and services
responsive to the
interest and needs of
senior citizens
50 1-Jan-
2015
1-Jan-
2065
17,400
$ 1
$ 1,154,664 $ (1,154,663) N/A
Tenant pays for
25% OF all
utilities and City
pays for the
remaining 75% of
the utilities
Tenant perform
all maintenance
and repairs
Tenant is
responsible
for all taxes
and
assessments
28
No.
Organization
-Tenant [Note 1]
Location
Separate
Service
Agreement
Non-monetary public
benefits
Current
Lease
Terms
(Years)
Lease
Start
Date
Lease
End
Date [Note 2]
A
Total
Space
Leased
in Sq. Ft.
B
Annual Rent
(2021) [Note 3]
C
Estimated Annual
Rent Market Value [Note 4]
[$5.53*12*A]
D
Estimated Annual
Market Rent
Variance
[B-C]
Security
Deposit Utilities Maintenance Property
Taxes
27 Avenidas H-
5 Cubberley Yes
Provide support
services to older
adults and their
caregivers
Month
to
Month
7-Jul-
2020
6-Jul-
2025
1,395 $ 21,929
$ 92,572
$ (70,643) $ 3,655
City furnishes
reasonable
quantities of
utilities except
telephone
services
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
28
PA Alto
Players-Peninsula
Center
Stage
Lucie
Stern Yes
Administration
support for benefits of providing quality
theater work for the
residents
9 1-Jul-
2015
31-Aug-
2024
500 $ 16,605
$ 33,180
$ (16,575) $ 1,125
City furnishes
reasonable
quantities of
utilities
City is
responsible for maintenance and
repair of the
structure
Tenant is
responsible for all taxes
and
assessments
29
Palo Alto
Community
Child Care
Ventura Yes
Provide child care
related uses, services and
activities
Month
to
Month
1-Jul-2016 30-Jun-2019 21,000 $ - $ 1,393,560 $ (1,393,560) $ -
Tenant pays for
all utilities except
for water supplied
to the open field
areas
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
30
Palo Alto
Community
Child Care
College
Terrace Yes
Provide child care
related uses,
services and
activities
Month
to
Month
1-Jul-
2016
31-Dec-
2019
2,000 $ -
$ 132,720
$ (132,720) $ -
Tenant pays for
all utilities (38% of
the total utility
costs supplied to
the College
Terrace Library
site)
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
31
Palo Alto
Community
Child Care
PAUSD Yes
Provide child care
related uses,
services and
activities
2 1-Jul-
2020
30-Jun-
2022
15,240 $ 77,670
$ 1,011,326
$ (933,657) $ -
Sublessee pays
for all utilities for
the monthly
amount set forth
in Exhibit A
($0.24 per sq. ft.)
City is
responsible for
maintenance and
repair of the
structure
Tenant is
responsible
for all taxes
and
assessments
32
Friends of
Junior
Museum and
Zoo
JMZ Yes
Construct the project
in full compliance
with the Facilities
Agreement
28-Jun-
2018
12-Nov-
2021
120,000
$ 1
$ 7,963,200 $ (7,963,199) $ -
Tenant perform
all maintenance
and repairs
City (Taxes
are not
mentioned in
the
agreement)
1 This list was compiled from (a) a List of Tenants included in the Policy and Services Committee Staff Report ID # 12078; (b) a list of nonprofit agreements compiled by Community Services Director; (c) additional lease agreements provided by the City's Real
Property Manager
2 Under the Holding Over provision, an expired lease continues on a month-to-month basis subject to all terms and conditions of the expired lease until the parties execute a written extension to the lease or lessee surrenders the property.
3 The 2021 Monthly Rent was calculated based on a current lease agreement or the 2021 total rent amount provided by the City's Administrative Services Department Real Estate Division
4 OCA estimated the annual rent market values by multiplying the size of entire property listed in the leasing agreement by the average monthly market rent of $5.53 per sq.ft. that was multiplied by 12 months. OCA calculated average monthly market rent
of $5.53 sq.ft. for Palo Alto using the monthly market rent values listed in the CoStar's Submarket Reports for Palo Alto Downtown (Office, Retail, Industrial) and for Palo Alto (Office, Retail, Industrial) that were generated by the City's Real Property
Manager, at the request of OCA, on August 23, 2021. OCA simplified the calculation utilizing the readily available information to estimate the market values, instead of gathering the precise market data, for the purpose of obtining roughly estimated maket
rent values. Therefore, the calculated market values may be significantly different from the actual market values as of August 2021.
29
Appendix C: Prior Year Findings and the Status - “Audit of Nonprofit Service Agreements” dated August 29, 2019
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.
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.
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.
Closed
Current practice of staff is to evaluate new partnerships arise, staff have
been working to ensure coordination and clear agreements while
balancing the unique relationships each partner may have. When
appropriate, as identified in this audit for like programs such as the award
of Human Services Resource Allocation Process (HSRAP), staff does
use similar agreements. In the absence of a template, staff routinely
coordinate internally by impacted parties and review prior agreements for
like terms and consistency.
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.
On-Hold
As a result of the onset of the COVID-19 pandemic and the City Council's
action to place any assessment of the Downtown Business Improvement
District (BID) on hold, operations of the Downtown BID, including
relationships with PADBPA have been placed on hold. The City Council
has waived the BID assessment fee through FY 2022. Staff anticipate
that in planning for FY 2023 over the coming fiscal year, that staff will
work with PADBPA or its successor to incorporate the recommendations
into the ongoing partnership.
The assessment invoicing and collection associated with the BID is now
the responsibility of MuniServices to coincide with the BRC invoicing and
system for ease of the businesses.
Expected Completion Date: FY 2023 Q1
30
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.
On-Hold
As a result of the onset of the COVID-19 pandemic and the City Council's
action to place any assessment of the Downtown Business Improvement
District (BID) on hold, operations of the Downtown BID, including
relationships with PADBPA have been placed on hold. The City Council
has waived the BID assessment fee through FY 2022. Staff anticipate
that in planning for FY 2023 over the coming fiscal year, that staff will
work with PADBPA or its successor to incorporate the recommendations
into the ongoing partnership.
Internally, the Administrative Services Department has assumed
responsibility of the financial responsibilities of the BID Fund with the
transfer of the BRC from DSD to ASD as well. The management of the
PADBPA contract remains with the CMO. The assessment invoicing and
collection associated with the BID is now the responsibility of
MuniServices to coincide with the BRC invoicing and system for ease of
the businesses.
Expected Completion Date: FY 2022 Q4
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.
Closed
Baker Tilly is currently in process of a non-profit agreement audit. During
that effort Baker Tilly will follow-up on outstanding audit
recommendations and account for them in their current audit activity.
31
Appendix D: Management Response
Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan
Finding: Nonprofit Service Agreements
All nonprofit agreements should consistently define the service level expectations, including the
goals, performance measures, and reporting requirements that enable the City to monitor the
performance of the nonprofit organizations and achievement of intended benefits. The higher the
risk associated with an agreement, the more refined the performance and reporting expectations
should be.
The City should also ensure that appropriate City resources are assigned to high-risk agreements
to manage such contracts and relationships adequately. Underperformance should be discussed
with the organizations before it become an issue, and appropriate corrective actions should be
taken to improve their performance.
CMO Concurrence: Agree
Target Date: FY 2023
Action Plan:
The City Manager’s Office will assign a team to review and update the City’s Public/Private Partnerships
Policy (POLICY AND PROCEDURES 1-25/MGR), last updated in 2007, to accommodate provisions to
address these elements ensuring clearly defined levels of services and the intended benefits. As part of
the drafting of the policy revisions, the varying levels of risk identified will be considered, implementing
stricter requirements for these higher risk types of agreements and guidance on appropriate staff
oversight. As the number of partnerships with non-profits increases both through contractual and real
estate transactions, including increased complexity and risks, additional staffing resources will be
necessary to keep pace with best practices and appropriate oversight.
The City should ensure that the City’s responsibilities included in the agreements are achievable
before agreements are signed to avoid noncompliance with the requirements.
CMO Concurrence: Agree
Target Date: FY 2023
Action Plan:
As part of the work to update City policies, any City obligations listed in the nonprofit agreements will
continue to be reviewed and signed off by all departments or functions directly responsible for satisfying
the obligations within the stipulated timeframe. Included in this update will also provide guidance not only
to continue current practices but also procedures should staff receive direction that is contrary to
recommended timelines.
The City should track the performance of nonprofit organizations and the City to identify the risks
associated with continuing the relationships (e.g. risk of not achieving the goals, reputation risk)
and discontinuing the relationships (e.g. risk of not finding alternatives) and take appropriate
actions to address the risks in a timely manner. The staff should maintain a list of all nonprofit
agreements and periodically report to the City Council on performance of nonprofit organizations
and any issues identified, resolved, and outstanding as appropriate.
CMO Concurrence: Agree
Target Date: FY 2023
Action Plan:
As part of the work above, the City will update the Public/Private Partnership Policy to (1) require
responsible departments to track the performance of non-profit agreements; and (2) create a periodic
reporting system on such performance akin to other reporting standards such as periodic execution of
contracts or leases under City Manager’s authority to execute. In addition, the Policy shall be updated to
identify potential areas of risk to help guide staff and Council when negotiation and evaluating any non-
profit partner agreement. However, as a de-centralized function, tracking and reporting city-wide is
beyond current resources and will require reprioritization of duties or additional resources.
32
Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan
Finding: Nonprofit Lease Agreements
Lease agreements with significantly reduced rent amounts should include performance and
reporting requirements to ensure the City receives the expected services, if there are no separate
agreements for the services provided on the premises. Depending on the risks associated with an
agreement, the City may need to assign a project manager, a liaison and/or a relationship
manager from the appropriate City department(s) to monitor the performance. The actual benefit
to the City should serve as a basis for reduction of the rent amounts when lease agreements are
renewed.
ASD Concurrence: Agree
Target Date: FY 2023
Action Plan:
As part of the work above, the City will review and revise City’s Leased Use of City Land/Facilities Policy
(POLICY AND PROCEDURES 1-11/ASD) to ensure appropriate reference to the City’s updated
Public/Private Partnerships Policy. Under these references, the City will consider heavily discounted
lease agreements with non-profits under the same frame as non-profits to ensure that the same risk
assessment and performance evaluation and metrics occur. Resource needs to support the heightened
level of tracking compliance will be required.
As required by the City’s policy, the City’s non-monetary support should be analyzed based on the
estimated fair market rental value and non-monetary benefits to be provided by nonprofit
organizations to determine the appropriate compensation for their use of the City-owned
properties and to ensure transparency and fairness in allowing rent amounts below the market
value.
ASD Concurrence: Partially Agree
Target Date: Begin FY 2023, and ongoing prospectively
Action Plan:
The City will update the Public/Private Partnership Policy to require that staff periodically report to Council
the overall amount of space, that is offered to non-profits on a subsidized basis. Staff may recommend
specific analysis such as evaluation of fair market value through consulting services in cases involving
very large outlays of space, value, and/or risk.