Troubled nonprofit asks Oakland for 2nd bailout

An Oakland nonprofit that has controlled millions of dollars in federal job training funds despite a troubled history is counting on city officials to help bail it out of its financial gloom.

The Oakland Private Industry Council, which Oakland officials contract to run the city’s federally funded job training program, says it needs more public money to continue offering those job training services through June 30.

But the Industry Council told the city it was having financial difficulty due to a reduction in funding and depletion of reserves and that its staff had lost wages in the past several years.

City staffers are recommending that the City Council vote Tuesday night to award the nonprofit a $250,000 grant.

It’s the second such bailout the Private Industry Council has requested to sustain employment services it offers under the federal Workforce Investment Act, a program intended to assist job seekers, laid-off workers, youths, veterans, persons with disabilities and employers. Last year the council granted $50,000 with no stated intent or expected outcome, according to a staff report from the city administrator’s office.

But the nonprofit has had its share of problems. A 2010 state audit showed that it mishandled nearly $1 million in federal stimulus funds that the city had allowed the nonprofit to manage. Under the Private Industry Council’s management, money intended for job creation was instead spent by other nonprofits on field trips to the Santa Cruz Beach Boardwalk, church repairs and car allowances, among other things.

In addition to those problems, records from the state’s Registry of Charitable Trusts show the Private Industry Council has failed to file tax forms on time.

President raised concerns

The city has repeatedly considered the group for grant money that no other nonprofit could hope to get, said former Council President Pat Kernighan, who was the lone “no” vote on the $50,000 grant last year.

At a June 2014 council meeting to approve the grant, Kernighan said it was unprecedented for city officials to set aside money for a group and expect nothing in return. Scores of well-intentioned nonprofits contract with the city to do all kinds of work, she said, and if the city handed over money to one of them, the rest would expect the same treatment.

“My concern with this is that we set a precedent whereby every single one of these nonprofits is now coming to the city and saying, ‘Well gee, I did a lot of work, and you didn’t pay me the full value of it,’” Kernighan said at the meeting last year.

Members of the council’s Community and Economic Development committee initially directed the city administrator to address the Industry Council’s funding gap at their March 24 meeting. Interim city administrator John Flores, said he recognized the value of the program and the emergency at hand. He cautioned the Industry Council to live within its means, noting it was the second year there had been a problem.

Private Industry Council CEO Gay Plair Cobb could not be reached for comment, but in statements filed with the city she argues that the money is not a grant, but rather money owed to the nonprofit because of poor city practices.

In a memo submitted to the council on May 19, the Industry Council claimed 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.

“As a result, the funding available under various RFPs has been arbitrary and without foundation either legally or by simple acknowledgment and analysis of the real costs of providing workforce services in the City of Oakland,” the memo states. It went on to accuse the city of poor budgeting, causing a financial gap that Industry Council members claimed they had covered for years.

Yet Kernighan wasn’t the only elected official to say that the organization, and not the city, has a poor track record for managing money.

Management questioned

City Auditor Brenda Roberts also questioned the Private Industry Council’s ability to manage the millions in public funds it receives each year. According to the group’s tax filing in 2012, it received more than $50 million from various government sources between 2008 and 2012.

“I share staff’s concerns that OPIC has not stayed within their authorized budget and now requires additional funding to meet their contractual obligations to the City,” Roberts wrote in a memo to the mayor, city council and city administrator in May.

Roberts suggested that if the $250,000 grant is approved Tuesday, a portion of it should be used to hire a professional accountant to help the Private Industry Council deal with its internal financial controls.

The Private Industry Council balked at the suggestion. In its memo, it touted the organization’s 30-year history of managing public and private resources.

“We find the city administrator’s recommendation regarding involvement of the City Auditor in this matter to be perhaps well-intentioned, but certainly misguided,” read a statement from the Industry Council to the City Council.

Rachel Swan is a San Francisco Chronicle staff writer. E-mail: rswan@sfchronicle.com

Twitter: @rachelswan