SAN FRANCISCO — As San Francisco confronts a record-setting budget deficit and debates over social service cuts grow more urgent, a new audit by the city’s Budget and Legislative Analyst (BLA) has found that inefficient practices in the city’s internal budgeting system may be wasting tens of millions of dollars annually.
At the center of the issue are interdepartmental services, or “work orders,” through which one department bills another for services. These can include legal advice from the City Attorney’s Office, facilities maintenance from Public Works, or information technology support. According to the audit, flaws in the oversight, justification, and billing processes for these transactions have led to consistent overbudgeting, lack of transparency, and delayed accountability—at significant cost to the city.
Supervisor Jackie Fielder, chair of the Board of Supervisors’ Government Audit and Oversight Committee, released the audit on April 28 and is pushing for urgent reforms. “At a time when the mayor is proposing drastic cuts to our most critical social services,” she said, “we must hold ourselves to the highest standards of accountability. These findings highlight the importance of transparency and making sure every dollar is spent wisely.”
Key Findings: A System Prone to Waste and Oversight Failures
Between FY 2018–19 and FY 2022–23, the city regularly ended the year with between $53 million and $80 million left over in unused work order funds—money that had been budgeted but never spent. In many cases, departments continued to request and receive funds for work that was not performed or for services that lacked clear justification.
The audit cites several core problems:
- Overbudgeting: From 2018 to 2023, General Fund spending on interdepartmental services increased by 70%, with significant portions unused at year’s end. Departments often requested more funding than needed, tying up resources that could otherwise go to public-facing programs.
- Unnecessary Carryforwards: Many departments consistently rolled over unspent funds year after year, further limiting budget flexibility for the mayor and Board of Supervisors. In FY 2022–23 alone, more than $79 million in IDS (internal budgeting system) appropriations were carried forward without clear documentation on whether the funds were still needed.
- Lack of Transparency in Tracking Spending: The city’s financial system, PeopleSoft, lacks functionality to track these expenditures in real time, forcing departments to rely on internal spreadsheets. This hampers oversight and increases the risk of human error.
- Inadequate or Missing MOUs: Many work orders lacked formal memoranda of understanding (MOUs), which should outline performance expectations and dispute resolution processes. Of 48 sampled work orders, only half had MOUs—and many were inconsistent in format and scope.
- Billing Delays and Lack of Detail: Key service providers such as the City Attorney’s Office routinely billed months after work was completed. Public Works often failed to provide detailed cost estimates to client departments, making it difficult to track how funds were spent.
- Circumvention of Oversight: Some departments fund full-time staff positions through work orders rather than requesting the funds directly—effectively avoiding Board of Supervisors scrutiny. The BLA found departments had hired employees without documenting the justification or necessity for the roles.
Recommendations for Reform
The Budget and Legislative Analyst’s Office issued 24 recommendations, targeting key city agencies:
- For the Controller’s Office: Develop new tools to automate the tracking of IDS spending; revise policy manuals to require formal MOUs; and ensure billing timeliness and clarity.
- For the Mayor’s Budget Office: Enforce annual justification requirements for all IDS transactions and carryforwards; standardize performance monitoring; and scrutinize cost structures for high-risk services.
- For the Department of Public Works and City Attorney’s Office: Provide clearer cost estimates and reduce billing delays.
Supervisor Fielder emphasized that these changes are not just technical fixes, but critical steps toward building public trust. “San Franciscans deserve a city government that is as efficient as it is equitable,” she said. “When we mismanage funds behind closed doors, we shortchange the very communities that rely on us most.”
Budget Pressures Heighten the Stakes
The timing of the audit could not be more significant. San Francisco is staring down a massive budget deficit and has proposed cuts to services ranging from homelessness outreach and addiction treatment to housing subsidies and public health.
Meanwhile, the audit shows that the city’s current system has created perverse incentives: departments may overbudget for services they never fully use, then quietly carry the funds forward or spend them without thorough review.
The audit notes that in FY 2022–23 alone, more than $332 million in interdepartmental services funds went unspent, either carried forward or returned to the general fund. That figure represents nearly 5% of the city’s entire budget that year.
A Call for Structural Change
The report urges the city to overhaul how it plans, tracks, and reviews interdepartmental spending, including formalizing performance reviews, introducing centralized data tools, and ensuring regular audits. Without such reforms, the city risks further fiscal inefficiency just as core services are under threat.
Supervisor Fielder and members of the oversight committee are expected to hold hearings in the coming weeks to discuss implementation of the audit’s recommendations and identify further accountability measures.
For a city already under intense pressure to prove that it can govern transparently and equitably, the audit delivers a clear message: behind-the-scenes budget practices are no longer invisible—and they can no longer be ignored.
