City Council
Staff Report
From: City Manager
Report Type: Study Session
Lead Department: City Manager
Meeting Date: October 28, 2024
Report #:2311-2309
TITLE
Nonprofit Relationships Study Session
RECOMMENDATION
Council to receive a report and provide feedback on a framework for strengthening the City’s practices in nonprofit relationship engagement, funding, support, and evaluation, informed by 2022 Nonprofit Audit insights and recommendations.
BACKGROUND
In June 2022 the Policy and Services Committee received a report from the City Auditor focused on identifying risks related to nonprofit agreements and provided corresponding recommendations for improvement.1 Key recommendations included defining clear service level expectations and performance management and evaluation on all nonprofit and lease agreements, as well as quantifying non-monetary support to determine appropriate compensation for nonprofits’ use of City-owned properties. Recommendations are summarized in Attachment A.
Through various agreements, the City engages with nonprofit organizations that support community needs and Council priorities. Agreements may be in the form of grants, professional or general services contracts or facility lease agreements. The City has an administrative policy on public-private partnerships that addresses some types of non-profit engagements, but the policy is neither comprehensive nor fully up to date with current City programs and practices.
Guided by the audit recommendations, this study session seeks feedback from the Council on an approach to review and improve the City’s programs for nonprofit support that is paired with 1 June 14, 2022 Policy and Services Committee Meeting:
https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=6282&compileOutputType= 1 appropriate expectations, on both sides, for accountability measures that reflect the variety of relationships.
ANALYSIS
The City of Palo Alto provides high quality community services and programs to its residents through its many libraries, parks, community facilities, recreation programs, art and cultural centers, with special consideration for its vulnerable populations such as seniors, children, and people with disabilities. The City also relies on other public agencies and nonprofit partnerships to deliver community services that provide a public benefit, which would otherwise be more expensive or highly specialized for the City to offer. A table with current nonprofit service and lease agreements are included in Attachment B and C.
Over the years, the paths through which nonprofit relationships have been formed and managed has varied given evolving community needs, organizational opportunities, Council priorities, and changes in City policies and processes. This has resulted in inconsistencies in the approach and management of nonprofit partnerships, such as the examples highlighted in the Nonprofit Audit Report. The audit findings provide an opportunity to refine this approach by establishing a framework based on overarching guiding principles and decision-making.
As a method for considering and rationalizing the wide variety of City nonprofit support relationships and to organize decision-making going forward, staff has developed a conceptual framework to discretely describe and discuss how partnerships are developed and implemented.
Our proposed discussion framework consists of a sequence of steps, including:
•Principles – the fundamental goals and values that guide the establishment and pursuit of partnerships;
•Practices – the policies and protocols, such as the use of Requests for Proposals, through which principles are implemented; and,
•Products – the visible methods, such as defined funding programs and administrative policies, through which the principles and practices are implemented and communicated to nonprofit partners and the community at large.
In concept, this sequence of Principles, Practices, and Products can be used to ensure that the City’s approach to pursuing prospective partnerships, decision-making, and administrative implementation are clear and consistent with their intended outcomes. This report provides a first attempt at applying this conceptual framework to reviewing our current partnerships and identifying areas for improvement that will guide decision-making into the future.
The following graphic illustrates the proposed approach for this review:
As a starting point for Council consideration, staff has reviewed prior actions and prepared a first draft set of principles that we believe reflect the City’s fundamental interests in establishing nonprofit partnerships. At the study session, staff will seek Council feedback on whether these Principles accurately reflect the City’s interests or should be revised or supplemented.
Principles Guiding Non-Profit Partnerships:
1.Impact-oriented focus and accountability- Partnerships will identify intended outcomes and prioritize unmet needs, and incorporate appropriate measures and reporting, while reflecting the nature of the engagements and avoiding unnecessary administrative processes.
2.Service alignment- Programs and services should align with the Council's priorities and identified community needs.
3.Fairness and open access- The City will maintain visibility and consistency in its partnership processes, to both the nonprofit community and public at large.
4.Equity and inclusion- Resource allocations will consider and prioritize accessibility of the resulting services to all community members, with particular attention to underserved and vulnerable populations.
5.Flexibility for special circumstances- The City Council will need the ability to act quickly when needed to respond to special circumstances.
While the Principles above are simply a draft, the following paragraphs provide examples of how the Principles can then be carried through our Practices and Products. As evident through the points that follow, identification of the City’s core Principles is an important first step.
Principle 1: Impact oriented focus and accountability- Partnerships will identify intended outcomes and prioritize unmet needs, and incorporate appropriate measures and reporting, while reflecting the nature of the engagements and avoiding unnecessary administrative processes.
The City ensures that the responsibilities of all parties reflect the nature of the engagement by promoting financial stewardship, managing risks to sustainability, and establishing measurable goals and oversight to maintain the effectiveness and accountability of nonprofit partnerships.
Related Practices
A. The significance of a partnership to both parties will be reflected in the City’s engagement on issues such as organizational and fiscal management
A. Where needed to manage risk of the relationship and service delivery, the City may support resources for nonprofit training and organizational development B. Where possible, City funding should not be the primary source of a nonprofit’s budget.
Where a major funder, the City may be involved in the nonprofit’s governance C. All agreements should include appropriate measurable goals and key performance indicators
D. Policies should include guidelines for underperformance and corrective actions E. The City’s responsibilities in agreements should be clear and achievable to avoid noncompliance
Related Products
1. HSRAP and CDBG grants already require regular financial reporting. Depending on significance to the nonprofit’s budget, other grants may also require ongoing and annual financial reports
2. Funding criteria states that City funding is leveraged and not significant source of organization’s budget
3. Consider designating a Council liaison to organizations where the City is a major funder
4. All grant program, direct grants, service, and lease agreements will include appropriate measurable goals and key performance indicators
Principle 2: Service alignment- Programs and services should align with the Council priorities and identified community needs
The City ensures that programs and services are aligned with Council priorities and evolving community needs by regularly evaluating organizations and making funding decisions based on their potential impact and capacity to deliver services.
Related Practices
A. Regularly evaluate current needs of the community, as well as services and organizations meeting these needs
B. Funding decision are made based on alignment with Council priorities, potential for impact, and the nonprofit’s capacity to deliver services Related Products
1. A Human Services Needs Assessment is currently conducted to update funding criteria and priorities for HSRAP. Other needs assessments should be considered in order to inform other grant activities
2. The City may explicitly consider Council priorities, community surveys and needs assessments prior to making new funding decisions
Principle 3: Fairness and open access- The City will maintain visibility and consistency in its partnership processes, to both the nonprofit community and public at large.
The City is committed to maintaining transparency and equity in its partnership processes, ensuring clear communication, equitable access to resources, and consistent application of subsidies based on public benefit.
Related Practices
A. Periodically review overall nonprofit funding, as a precursor to new decisions B. Prior to significant funding decisions, broadly communicate the availability of funding C. When providing financial support, clearly communicate goals and expectations for how funding will be used
D. Below-market rental of City facilities will be visible to all and periodically revisited E. Subsidies will be consistently applied and based on public benefit received F. Periodically review overall grant programs, direct funding, and below-market leases to ensure alignment with current goals, and direct program-level adjustments as appropriate
Related Products
1. Develop a publicly-available summary and calendar of nonprofit funding opportunities
2. Annually report overall nonprofit funding and lease subsidies
3. Agreements with nonprofits for ongoing direct funding (outside of grant programs) will reflect a periodic review, in order to ensure continued alignment in the context of other available service providers
Principle 4: Equity and inclusion- Resource allocations will consider and prioritize accessibility of the resulting services to all community members, with particular attention to underserved and vulnerable populations.
The City is dedicated to ensuring that services and resources are accessible to all community members, especially underserved and vulnerable populations, by upholding high standards of transparency in decision-making, fostering inclusive practices, and engaging the community in continuous improvement efforts.
Related Practices
A. Maintain high standards of transparency in decision-making and award process B. Where appropriate, include boards and commissions in the review process C. Consider specific conflict of interest polices for disclosure of relationships with nonprofit applicants
D. Solicit feedback after each funding cycle to identify areas for improvement and increase responsiveness to community needs
Related Products
1. The HSRAP program will continue the Human Relations Commission’s role in making grant recommendations and presentation to the City Council
2. Consider requiring by policy that significant direct funding decisions be reviewed by applicable board or commission
Principle 5: Flexibility for special circumstances- Council has the discretion to consider special circumstances
Staff anticipates that the Council will want to retain the discretion to address special circumstances, whether unusual opportunities to take advantage of investments by others, time- critical needs, or others. This principle would be achieved by establishing clear procedures for awarding agreements or grants outside of standard processes and developing policies to manage one-off requests.
Related Practices
A. Identify circumstances and procedures through which agreements and/or grants are awarded outside of the established processes
B. Requests that fall outside these circumstances would require more extensive review Related Products
1. Develop a policy for managing one-off requests
2. Create a Council emerging needs earmark within its contingency fund Staff would like the City Council to provide feedback on the overall guiding principles and structure in this report. Noting that additional funding strategies within each category could be defined. For example, Council may create a funding program for special events. Following Council discussion and feedback, staff will recommend appropriate policy adjustments and develop new processes and procedures as appropriate for Council consideration and where appropriate, adoption. Staff will also develop a stakeholder outreach strategy to inform and receive feedback from our nonprofit partners.
FISCAL/RESOURCE IMPACT
No additional resources are required to support the discussion outlined in this report; however, depending on Council feedback, additional resources may be required to support the planned Nonprofit Relationship review as well as any policy or management and oversight changes that may result. Departments that manage a significant amount of service agreements and nonprofits leases, such as the Community Services and Administrative Services Departments may be most affected. Follow-up work required may also impact resources, such as revising existing agreements and any related work such as appraisal services to determine market values.
STAKEHOLDER ENGAGEMENT
Following the City Council’s initial review and feedback, the City will engage with stakeholders especially the nonprofit community. Staff anticipates using this engagement to inform recommendations that would then return to Council.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by the California Environmental Quality Act (CEQA). CEQA Guidelines section 15378(b)(2).
ATTACHMENTS
Attachment A: Summary of 2022 Nonprofit Agreement Audit Recommendations Attachment B: FY 2025 Nonprofit Service Agreements Over $10K Attachment C: FY 2025 Nonprofit Lease Agreements
APPROVED BY:
Ed Shikada, City Manager