SF Nonprofit Faces Loss of City Funding Following Alleged Employee Misconduct

A major player in SF’s affordable housing system is facing heightened city oversight after officials flagged alleged employee self-dealing and other financial concerns that could put millions of dollars in public funding at risk.

The city’s Controller’s Office has assigned the Mission Economic Development Agency (MEDA) its most serious risk designation for city-contracted nonprofits, citing alleged unauthorized employee expenses and self-dealing, along with nine other financial concerns, as the Chronicle reports. The designation could lead to stricter oversight and the loss of millions in city funding if MEDA fails to address the problems.

MEDA reported the employee’s actions to city officials and said the former employee no longer works for the organization. In a statement, MEDA said it believes it was the victim of a crime and has taken steps to prevent a recurrence. The Controller’s Office said MEDA has been working to address the concerns and could have its designation lowered or removed after taking the necessary corrective measures.

Executive Director Luis Granados told the Chronicle that MEDA has been working with the Controller’s Office since April and remains confident its city contracts and affordable housing loan agreements are secure.

MEDA’s projects include Marvel in the Mission, a nine-story affordable housing development at 16th and Mission streets that recently broke ground.

Meanwhile, Supervisors Matt Dorsey and Danny Sauter reportedly delayed a vote on a separate city loan agreement worth up to $22 million to help MEDA acquire a 39-unit building and preserve it as affordable housing. Dorsey said the committee needed more information about the reported misconduct before proceeding, while Sauter requested several weeks to examine the organization’s financial difficulties.

Mission Local reported in May that the organization laid off 12 employees, primarily in administrative roles, and imposed pay cuts as part of a plan to reduce expenses by 21 percent. Granados voluntarily took a 43 percent pay cut for one year. MEDA reportedly attributed the financial strain to expansion costs outpacing revenue, slower-than-expected philanthropic funding, and delayed city reimbursements.

The financial concerns came after the city approved a $37.8 million refinancing package last year for 15 MEDA-owned apartment buildings included in the city's Small Sites program, including approximately $6.2 million in new financing for repairs and reserves. The Small Sites program helps nonprofits acquire older apartment buildings and preserve them as permanently affordable housing.

MEDA’s Small Sites portfolio reportedly includes 89 residential units and nine commercial units. According to Mission Local, the refinancing reduced annual loan payments by about $340,000, but city officials warned that the properties’ long-term financial viability remains uncertain because of substantial repair needs and rising operating costs.

Affordable housing experts have pointed to challenges in the Small Sites program, including rent restrictions, which can make it difficult to cover rising insurance, maintenance, and repair costs, leaving some properties financially fragile. Former Supervisor Aaron Peskin told Mission Local the city’s priority is keeping affordable housing available rather than taking buildings back from nonprofit owners.

MEDA said at the time that its real-estate operating budget is separate from its broader organizational budget and that its housing portfolio is in good financial standing following the refinancing.

Per the Chronicle, the Mayor’s Office of Housing and Community Development said in a statement this week that MEDA plays an important role in serving San Francisco communities and described the new designation as a framework for improving the nonprofit’s financial management and long-term stability.

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