Oakland Considers 2nd Bailout for Nonprofit in Charge of its Workforce Development Efforts

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June 1, 2015;San Francisco Chronicle

The critical issues surrounding local governments contracting with community-based nonprofits to perform large federally-funded programs have surfaced in Oakland, California—another example of the importance of transparency and accountability when the two are joined at the hip.

The San Francisco Chronicle reports on an Oakland nonprofit with a “troubled history” relying on the city to help bail it out of its financial problems, despite the fact that it has controlled millions of dollars in federal job training funds allocated to the city.

The Oakland Private Industry Council, with which Oakland contracts to run the city’s federally funded job training program, needs more public money to continue through June 30th. But the paper reports that the Industry Council told the city it was having financial difficulties due to funding cuts and a depletion of its reserves.

City staff is recommending that the city award the nonprofit a $250,000 grant when its council meets this week. It would be the second bailout the Industry Council has requested to continue operating under the federal Workforce Investment Act, a program that assists job seekers, laid-off workers, youths, veterans, persons with disabilities, and employers. Last year, it received an unrestricted $50,000 grant.

The Chronicle reports that the nonprofit has had problems—a state audit in 2010 showed it mishandled nearly $1 million in federal stimulus funds, California’s Registry of Charitable Trusts show the Council has failed to file its 990’s on time.

The council president has raised concerns over the nonprofit’s relationship with the city, telling the paper that “the city has repeatedly considered the group for grant money that no other nonprofit could hope to get…[and] it was unprecedented for city officials to set aside money for a group and expect nothing in return.”

Oakland’s interim city administrator, while acknowledging the value of the program, admonished the Industry Council to live within its means. Meanwhile, the nonprofit’s CEO has argued that the money is owed to the nonprofit because the city “failed to determine how much money the group needed to manage the federal job training program that the city entrusts the nonprofit to do.”

The city’s elected leadership counters that it is the organization, and not the city, with a poor track record for managing the millions of dollars in public funding it receives annually—it received more than $50 million from various government sources between 2008 and 2012. The council president told the Chronicle that the nonprofit should commit to management reforms if the new grant is approved. Naturally, the Industry Council is resisting that requirement.—Larry Kaplan