Audit: Oakland Promise used city funds without approval

The Oakland Promise -- Mayor Libby Schaaf’s multifaceted initiative to significantly increase the number of college graduates from the city -- illegally used city hall office space and used city funds without proper authorization, according to a new City Auditor's report.

OAKLAND — The Oakland Promise — Mayor Libby Schaaf’s multifaceted initiative to significantly increase the number of college graduates from the city — improperly used City Hall office space and used city funds without proper authorization, according to a new city auditor’s report.

Though the program’s merits have often been celebrated, it came under fire earlier this year when the City Council declared Measure AA — a $198-per-house, $135-per-apartment annual parcel tax measure on last November’s ballot intended to boost funding for Oakland Promise — had passed despite falling short of a two-thirds majority. Oakland was sued over the City Council’s decision and lost; an Alameda County Superior Court judge deemed the parcel tax unenforceable.

Amid the controversy surrounding Measure AA, local activists began to question the legality of the program itself: It wasn’t a city department, yet it used city money and its employees had rent-free offices in City Hall. In August, the City Council requested the city auditor’s office to look into Oakland Promise.

Among the findings in the auditor’s report, released Wednesday, was that the city had allowed Oakland Promise employees to work out of City Hall since 2016 without any formal agreement. According to the city’s regulations, the City Council is responsible for approving leases and requires city property to be leased, in most cases, for payment at fair-market value.

But the mayor’s office directed the city administrator’s office to provide workspace for about two years for Oakland Promise’s partner organization — the East Bay College Fund nonprofit — in City Hall, including three desks equipped with phones, computers and internet access, according to the report. There was never a contract or lease agreement.

Oakland Promise officials announced earlier this year that the organization was merging with the East Bay College Fund to become a nonprofit.

Auditor Courtney Ruby also found that the Oakland Promise used more than $700,000 of city funds to pay a staffer’s salary without proper authorization.

Since the start of the 2017-18 fiscal year, the City Council has authorized a total of $704,374 to pay for the salary of David Silver, the mayor’s director of education. But Silver was actually working for the Oakland Promise, so the money was technically an “in-kind contribution” but never authorized as such.

The in-kind contributions were never transparent in public reports, Ruby said. The grants that the city awarded the Oakland Promise were lawful and transparent, though.

Mayor Libby Schaaf’s spokesman, Justin Berton, issued a statement Wednesday thanking Ruby for the report and accepting its findings.

“We regret 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,” Berton said.

Ruby recommended that Schaaf and the city administration comply with Oakland regulations as they pertain to providing space in City Hall to third-party organizations, and that the City Council request that the administration make an annual report on leases or other arrangements it makes with organizations.

Ruby also recommended that the council make a formal policy on allowing organizations to use city facilities, which would include requiring non-city employees to sign a formal agreement with the city “that protects the interest of both parties.” Ruby’s final recommendation was that the City Council establish a policy for how in-kind contributions are authorized.

The mayor’s office agrees with all of the recommendations, Berton said.