City Reviews Its Contracts with Nonprofits, Quasi-Governmental Organizations

City staff members are in “exploration mode” as they respond to Mayor Ron Nirenberg’s call for an overhaul of contracts the City of San Antonio has with nonprofits and quasi-governmental organizations such as the Tricentennial Commission and Centro San Antonio, City Auditor Kevin Barthold said Wednesday.

New rules, such as background checks and procurement transparency, may be required of such organizations, depending on their size, service, impact, and amount of public funding they receive, Barthold told City Council’s Governance Committee. As part of the review, the Ethics Review Board may gain jurisdiction over City-related entities.

The review includes 272 partnerships that total $120 million in annual public investment, from partnerships with social service agencies such as Habitat for Humanity or ChildSafe, which serve some of San Antonio’s most vulnerable populations, to local government corporations such as the Tricentennial Commission.

Nirenberg, who chairs the five-member Governance Committee, charged staff with the review after the leaders of both the Tricentennial Commission and Centro San Antonio stepped down in November. Centro San Antonio’s president and CEO, Pat DiGiovanni, resigned amid allegations of an embezzlement scheme carried out by an employee with a criminal record, while Tricentennial Commission CEO Edward Benavides stepped down following questions about the group’s fundraising shortfalls and contracting process. (Both Centro San Antonio and Tricentennial Commission are undergoing audits; no arrests or charges have been filed in the Centro case.)

New rules can’t prevent all future criminal activity, City Manager Sheryl Sculley said, but in the case of Centro, a background check would have revealed the employee’s felony record.

“That was the only thing that could have been done to prevent that,” Sculley said. “[Background checks] could be a recommendation [that comes] out of this process.”

The contract overhaul should be more focused on organizations that the City has created and that use public money, Nirenberg said, because the standards should be higher in those cases. “Especially in family service … we want to make sure that when we’re working with those organizations we’re putting them in a position for success.”

City staff has identified 25 city-created and/or local government organizations dating back to the 1970s, Barthold told the Rivard Report, some of which are inactive.

Council members on the committee cautioned Barthold and City Attorney Andy Segovia, who are leading the internal review and recommendation process, against over-regulating the nonprofits that might not be able to afford compliance with new rules. Background checks and training cost time and money that be beyond the budgets of some organizations.

The money that nonprofits receive should go towards carrying out their missions, not burdensome compliance, Councilman Rey Saldaña (D4) said. “It’s important to react … but also important not to overreact.”

Council members Rebecca Viagran (D3), Ana Sandoval (D7), and Roberto Treviño (D1) also expressed concern about smaller nonprofits’ ability to comply with new rules during the meeting.

A big piece of the task ahead will be making sure the strength of the rules match the size and “risk profile” of the organization, Segovia said. Larger organizations that receive public dollars or work closely with the City will likely have “robust” provisions and oversight, including that of the Ethics Review Board. Staff will take steps to make sure the recommended contractual obligations aren’t “too burdensome on a delegate agency or nonprofit” that has fewer resources, he said.

Delegate agencies, which contract with the City to provide social services, are reviewed and funded on a two-year cycle through a request for proposal (RFP) process. Those RFPs will go out in March, Barthold said. “We want to put [new contract language] in the RFP information so they know what our requirements are going to be.”

Below is the list of actions Nirenberg requested City staff to take in November:

1. “To review the standard contract provisions in City agency funding agreements to ensure that these contracts include all reasonable and adequate protections of the public dollars.
2. “To prepare additional contract requirements for non-profits to ensure that significant contracts and real estate transactions involving public dollars are pursued in an ethical manner and in accordance with policies that promote transparency and integrity of the contracting process. Ethical behavior is more than following rules; it requires understanding as to how actions will protect the public’s interest and how they will be perceived.
3. “To prepare recommendations that will ensure that decisions made by City-formed non-profit or quasi-governmental organizations are subject to the review and jurisdiction of the Ethics Review Board. The governance structure and bylaws of any organization created by the City – or supported by direct public benefit – should uphold the highest standards of transparency, oversight and ethics.
4. “To develop an annual training program for non-profit executives and board members regarding their oversight responsibilities, especially with respect to City funds and transparency.”