SAN FRANCISCO, CA — The Controller’s recently completed audit of an Office of Community Investment and Infrastructure (OCII) grant agreement with The Mexican Museum (the Museum) identified serious concerns regarding the Museum’s capacity to fund the physical buildout and renovations of its new space at 706 Mission Street in SoMa and open to the public by its goal of 2025.
Four million of a $10.6M grant agreement (established in 2010 and set to expire in three months) has been disbursed to the Museum, self-described as an organization that promotes the Mexican, Chicano, Hispanic, Mexican-American, and Latino experience. Grant funding provided through OCII was intended to aid the Museum’s expansion to a larger space after it outgrew its previous location in Fort Mason, while the remainder of the additional $50 million needed remains the responsibility of The Museum. The Museum originally opened in 1975 in the Mission District and moved to Fort Mason Center for Arts & Culture in 1982.
The Controller’s audit, initiated at the request of Board President Aaron Peskin, assessed the compliance and performance outcomes of the Museum against its agreements with OCII and the City. The audit found overall concerns about the financial health and fundraising capabilities of the Museum, inappropriate use of grant funds spent on ineligible or unsupported activities, and deficiencies in OCII’s enforcement of the grant agreement. Notable issues include:
- The Museum has a very small fraction of the funds needed to complete the project. Even with grant funding from OCII, the Museum forecasted that it needed to raise an additional $49M of capital funds to complete renovations of the new space. As of December 2022, the Museum had only 2% (approximately $835K) of the cash needed to complete the expansion and could not demonstrate that additional funds had been raised during the course of the audit.
- The Museum failed to complete any substantial renovation improvements, 24 months after the issuance of the temporary certificate of occupancy for the core and shell, and to comply with some reporting requirements, as required in the terms of its lease agreement with the City’s Real Estate Division.
- The Museum spent $43,616 for ineligible activities and $930,247 for questionable activities. Ineligible expenses include duplicate expenses and legal services related to activities for other grants. Questionable expenses include costs for salaries and benefits, or accounting and auditing fees, all of which were not sufficiently supported and were not clearly tied to the grant’s purposes. Further, the Museum used $562,579 of grant funds to support its operations at its Fort Mason location.
- OCII did not effectively enforce the grant agreement requirements or thoroughly review the documents that were intended to support the Museum’s expenditure of grant funds.
“We’ve provided the City agencies involved in the project with a clear set of recommendations, and will be regularly checking in on their progress,” said Controller Greg Wagner. “There’s a relatively short window for the Museum to do a lot of work, and ultimately, we’ll have to do what’s in the best interest of the public and their taxpaying dollars.”
“This audit provides clear direction to the Mayor and the Board of Supervisors that, after 20 years, it’s time for this project to move forward or for the City to find another steward,” said Board of Supervisors President Aaron Peskin, who began calling for hearings in 2019 as to the status of the Purchase & Sale Agreement deliverables, including the cultural component, at 706 Mission Street. “Healthy arts and culture institutions are a critical component of the City’s downtown recovery efforts, and the fabric of the Yerba Buena neighborhood. The 706 Misson cultural component is now a city asset that we must ensure delivers the highest benefit and value for the San Francisco taxpayers and arts community.”
The Controller’s Office has recommended that the Museum should produce achievable fundraising goals, a plan indicating how it will complete the build-out of the premises — including a realistic schedule, with detailed milestones, showing when next year the space will open to the public. If the City determines that the project is no longer viable, the City’s Real Estate Division, as the Museum’s landlord, will need to devise an alternative use for the space.