Audit reveals Mexican Museum short funding to complete new site

California Construction News staff writer

A recent audit of an Office of Community Investment and Infrastructure (OCII) grant agreement with the Mexican Museum revealed “serious concerns” about funding for the physical buildout and renovations at 706 Mission St. in San Francisco and concluded the site will not be completed by its goal of 2025.

“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 and sale agreement deliverables, including the cultural component, at 706 Mission St. “Healthy arts and culture institutions are a critical component of the downtown recovery efforts, and the fabric of the Yerba Buena neighborhood.

The audit was conducted by Controller Greg Wagner who recommended the museum produce achievable fundraising goals, a plan indicating how it will complete the build-out of the project — including a realistic schedule with detailed milestones.

If the city determines the project is no longer viable, the real estate division, as the museum’s landlord, “will need to devise an alternative use for the space,” the Controller concluded.

Four million of an approved $10.6 million grant agreement established in 2010 and set to expire in three months, has been provided to date. Grant funding through OCII was was expected to aid the expansion to a larger space after the museum outgrew its previous location in Fort Mason. Also, $50 million was set as a fundraising goal.

The audit assessed compliance and performance outcomes against the agreements with OCII and the city and found 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.”

Issues include:

• 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 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.”