San Francisco’s Mission Economic Development Agency (MEDA), a 53‑year‑old affordable‑housing nonprofit that manages more than 1,300 units, is under heightened city scrutiny after an independent audit revealed unauthorized information‑technology purchases and inadequate financial safeguards.
Audit findings and city response
The audit, completed on Sept. 30 and covering MEDA’s 2025 fiscal year, was conducted by accounting firm Aprio LLP as part of the agency’s required annual review. Auditors said a former employee had set up unauthorized vendors and submitted invoices that bypassed MEDA’s established procurement controls.
According to the report, MEDA lacked sufficient segregation of duties, vendor‑verification procedures, and conflict‑of‑interest disclosures. The auditors classified these deficiencies as a “material weakness,” meaning the nonprofit was exposed to the risk of misappropriated funds through inflated or improper payments.
City’s Tier 3 designation and financing delay
Following the audit, San Francisco Controller Greg Wagner placed MEDA in the city’s Tier 3 category—the highest‑risk level for nonprofit contractors. The designation triggered a review of ten unresolved issues, including missing documentation for city‑billed expenses and questionable subcontractor payments.
City supervisors, reacting to the Tier 3 status, postponed a scheduled Oct. 21 committee vote on a proposed financing agreement of up to $22.2 million. The vote is now set for the upcoming Wednesday, giving MEDA additional time to address the controller’s concerns.
MEDA’s corrective actions
MEDA’s Executive Director Luis Granados told Mission Local on Oct. 22 that the organization has already taken steps to resolve the audit’s findings. “There were concerns about internal controls. Those have been fully resolved,” he said.
The nonprofit reports that it has tightened vendor verification, required conflict‑of‑interest disclosures, and brought in a temporary outside IT vendor while it reviews the alleged misconduct. MEDA also says its insurer covered the amount related to the unauthorized purchases, though the exact figure was not disclosed.
Granados emphasized that the agency’s internal safeguards have improved each year. “Every year they have become stronger,” he asserted, adding that the organization has a 12‑month financial runway as of Aug. 31.
Historical context of audit warnings
MEDA has faced audit warnings for material weaknesses since 2021, largely attributed to finance‑staff turnover and a transition to new accounting systems in 2024. Despite those issues, the nonprofit received “unmodified” audit opinions after making corrective changes, indicating that auditors believed the financial statements fairly represented the organization’s finances.
The latest audit, however, identified the alleged IT procurement misconduct as a new concern, prompting the city’s heightened oversight.
City’s recommended reforms
In its Oct. 19 letter, the controller’s office outlined ten specific improvements, including better documentation of credit‑card charges, more reliable employee time records, enhanced expense tracking, and stronger revenue forecasting. The controller also suggested executive financial‑leadership coaching and training for staff to quickly assess the nonprofit’s financial health.
MEDA has indicated that it is working through the controller’s response process and considers it “premature to comment further” while the review remains open.
What’s next?
The upcoming city committee vote will determine whether MEDA receives the proposed $22.2 million financing. The outcome will likely hinge on the nonprofit’s ability to demonstrate that its internal controls are now robust enough to prevent future misappropriation.
Stakeholders, including city officials and community advocates, will be watching closely as MEDA seeks to restore confidence in its stewardship of public and private funds while continuing to provide affordable housing to San Francisco residents.
Original reporting: Mission Local — read the source article.
