City Auditor Says Mayor Schaaf Misused City Money and Resources to Fund Oakland Promise

Posted in Education/Schools/Youth, Oakland Promise

Investigation reveals nonprofit received free office space and over $700,000 in city funds to pay staffer’s salary

By Ken Epstein

Mayor Libby Schaaf directed the city administration to make “inappropriate contributions” to her favored nonprofit organization, The Oakland Promise, bypassing the Oakland Municipal code and paying the director of Oakland Promise over $700,000 without authorization, according to the findings  of an investigation released this week by the Oakland Office of the City Auditor.

The office of the City Auditor Courtney Ruby conducted the investigation in response to multiple “whistleblower allegations” and questions raised by the City Council in June 2019.

The Oakland Promise, a nonprofit “multi-agency partnership” that includes the Mayor’s Office, the Oakland Unified School District, the East Bay College Fund and the Oakland Public Education Fund, raises money to provide scholarships and other educational opportunities for Oakland youth. The organization began in 2014, and in 2015, the Mayor’s Office joined the partnership “and assumed a leadership role in collaborating with these organizations,” according to the auditor’s report on the investigation.

In June 2019, the East Bay College Fund changed its name to Oakland Promise, which became a registered nonprofit organization.

The auditor’s investigation concluded:

• “The Mayor’s Office directed the City Administration to provide workspace to Oakland Promise without following Municipal code requirements.” Without proper authorization, starting in 2016, the city provided three workstations, phones, computers and internet for up to five Oakland Promise employees for two years on the 11th floor of City Hall. “This arrangement … contrasts with other third-party organizations that have used city-owned real property,” the report said. “Other third-party entities using city-owned real property have formal agreements and were charged rents (and) have provided verification of insurance coverage.)”
• “For 16 months (from July 2015 – Nov. 2016),  the Mayor’s office allowed an Oakland Education Fund employee to lead Oakland Promise as the “Mayor’s Director of Education” without executing an agreement to ensure the City’s interests were promoted and protected.”
• Since fiscal year 2017-2018, the city has funded the Mayor’s Director of Education, who continued to work for Oakland Promise, “without authorization from the City Council as an in-kind contribution to Oakland Promise, at a cost to the city exceeding $700,000.”

The Mayor’s Director of Education, David Silver, was not mentioned by name in the auditor’s report.  “City financial records show that (David Silver) has accounted for $704,374 in direct personnel-related costs from the city’s General Purpose fund between July 1, 2017 and Nov. 7, 2019.

In August 2015, Mayor Schaaf submitted a Memorandum of Understanding (MOU) to the City Council to implement Oakland Promise, approving it herself while the council was on summer recess. A memo from the mayor stated that the “MOU has no cost implications to the City of Oakland.”

According to the auditor’s findings,“It wasn’t until June 2019 that a republic report summarized the city’s financial and in-kind contribution to Oakland Promise.”

In total, the city has contributed $4,372,428 to Oakland Promise, including authorized and unauthorized expenditures and excluding the cost of in-kind donation of office space and equipment, which is unknown.

Among its recommendations, the City Auditor suggested that the city administration “should comply with the Municipal Code in providing space to other others” and suggested that the City Council request a yearly report on leases and other arrangements with organizations that use city facilities. The auditor also suggested that the City Council develop a policy that requires in-kind contributions to be “formally authorized in advance.”

The Mayor’s Office agrees with all of the recommendations, said Justin Berton, the mayor’s director of communications.

“The Office of the Mayor is grateful for the City Auditor’s detailed report that concludes every contribution to the Oakland Promise is being used to send more kids to, and through college,” he said. “We regret, however, that in the eagerness to launch a generation-changing education initiative, we unintentionally failed to properly document the legal use of City Hall office space and a grant to support an employee’s salary. We wholeheartedly support all of the City Auditor’s recommendations that will bring clarity to this process in the future.”