Committee advances 6-month extension for 711 Post shelter amid controller findings and fiscal concerns

The Budget and Finance Committee voted on Sept. 17 to forward to the full Board of Supervisors a six-month amendment extending Urban Alchemy’s grant to operate the adult shelter at 711 Post Street through March 31, 2026, and increasing the not-to-exceed total for the site to $27,600,000. The committee recorded a 3-0 roll-call to forward the item to the full board without a committee recommendation.

The amendment and the hearing were the subject of extended questioning from supervisors. The Budget and Legislative Analyst and Department of Homelessness and Supportive Housing (HSH) described the shelter’s operational outcomes as strong: the 711 Post site has met five of six service objectives in its contract and serves roughly 690 unique adults per year. HSH said the site’s per-bed nightly cost (about $91) is below the department’s estimated cost for comparable shelter services and highlighted room configurations and ground-floor amenities as program strengths.

Controller’s monitoring and corrective action: The city controller’s office informed the committee that its fiscal monitoring process placed Urban Alchemy on a citywide corrective-action designation ("tier 2") based on compliance findings. The controller identified two central issues that led to the designation: 1) the provider reported roughly 15 days of operating cash on hand rather than the city guideline of 30 days, raising a liquidity concern; and 2) time-allocation and payroll reporting for shared salaried staff did not follow the controller’s standard (functional time sheets or a time study), which impeded a clear cost allocation across programs. The controller said Urban Alchemy has begun conducting time studies and the auditor will work with the provider to establish milestones for removal from the tier designation.

Overspending and corrective actions: The Budget and Legislative Analyst reported the site had fiscal-management problems extending back to 2023 and that Urban Alchemy knowingly overspent a grant budget by roughly $800,000 at this site after being told not to; HSH ultimately paid about $336,000 of that amount in fiscal 2024–25. HSH told the committee it issued a departmental corrective-action letter in June, received a response from Urban Alchemy, and has directed a five-step corrective plan focused on staffing schedule alignment, proactive monitoring against budgets, prior written approvals for staffing costs, overtime policies and regular finance–program review. Urban Alchemy’s newly hired chief financial officer testified that the organization has brought accounting in house, implemented more robust budgeting, hired finance staff, begun time studies for shared salaried employees and added reporting to the board and executive team.

Supervisors’ direction and timeline: Committee members said they wanted the city and controller to monitor progress closely. Several supervisors asked for a check-in within approximately 60 days on corrective actions and requested that the controller provide anticipated milestones for removal from the tier designation. HSH said it will continue weekly and monthly monitoring with Urban Alchemy and could consider replacing the provider if corrective actions are not demonstrated — but cautioned that changing operators midstream would be operationally complex because Urban Alchemy is the lessee at the site.

Vote and disposition: Given the programmatic performance at 711 Post and the immediate need to maintain shelter capacity, the committee forwarded the amendment to the full Board of Supervisors without a committee recommendation; the committee vote was 3-0 (Dorsey, Chen, Chan — all "ayes"). HSH and the controller will report back to the committee with corrective-action progress and milestones prior to any longer-term contract decision.

Ending: The matter will come before the full board; HSH and the controller have been asked to provide an update on corrective actions within the coming months so supervisors can evaluate whether to approve a longer-term extension.