Most of us, even those of us who spend a lot of time trying to understand the San Francisco city budget, don’t think a lot about “interdepartmental services.” It’s a weird part of the city’s financial operations that’s often hard to understand and seems to make very little sense—which is probably why it’s not generally part of the larger budget debate.
But according to a new audit by the Budget and Legislative Analyst, it should be: Interdepartmental services accounted for more than $1.3 billion in the 2022-2023 budget.
And, according to the audit, requested in 2024 by then-Sup. Dean Preston, $332 million was unspent that year.
We’re talking about more than half of next year’s projected deficit—and it’s not entirely clear where all that money wound up.
Interdepartmental services are accounting charges, money that goes from one department to another. Muni, for example, pays the cops $1 million a year for security services—although under the City Charter, the Police Department is supposed to patrol everywhere, including on the buses. The City Attorney’s Office charges some departments for legal services, although the charter gives that office the responsibility for representing every city official and agency.
You get the picture.
From the audit:
In each year between FY 2018-19 and FY 2022-23, appropriations for interdepartmental services had between $53 and $80 million across all funds remaining at year-end, separate from any unspent funds carried forward for anticipated future use. From FY 2018-19 to FY 2022-23, the amount of these unspent appropriations increased by $23 million, or 43 percent, across all funds, and by $12 million, or 70 percent, in the General Fund. We also observed overbudgeting in our review of sampled interdepartmental services: in FY 2022-23, out of our sample of 48 interdepartmental services accounts, 25 accounts (52 percent) had funds remaining at year-end that were not carried forward for anticipated future use. Ongoing and increasing overbudgeting for interdepartmental services causes overall budgetary inefficiency and ties up funding, including a significant amount of General Fund monies, that could otherwise be budgeted for and spent on other programs or services.
There are no clear rules for how unspent money is used; sometimes, departments just roll it over into the next year’s budget. The Controller’s Office doesn’t monitor this particularly well:
Our review of manual carryforwards for interdepartmental services (IDS) between FY 2018-19 and FY 2022-23 identified potentially unnecessary carryforwards and patterns of consistent carryforward use from year to year. Unnecessary carryforwards reduce the flexibility of the Mayor and Board of Supervisors to make budget policy decisions, particularly in the General Fund.
More:
The Controller’s Office, the Mayor’s Budget Office, and the other City departments lack sufficient visibility into actual spending on interdepartmental services (IDS) due to a software functionality issue. Although the City’s prior financial system allowed departments to track IDS spending using a unique identifier for each IDS, this functionality does not exist in the City’s current financial system, PeopleSoft. As a result, City staff track IDS spending through internal spreadsheets that vary by department. Maintaining these spreadsheets requires staff time and effort and may lead to staff delays in updating internal IDS trackers, limiting their visibility into spending.
Some departments don’t even have written agreements with other departments around these transfers.
Sometimes, according to the audit, departments fund numerous staff positions from departmental transfers, and it’s not clear why:
For one IDS we reviewed, in which a department used special revenue monies to fund 15.54 full time equivalent positions (FTEs) in another department, staff initially questioned whether this was an allowable use of the funding source. For another IDS, in which five departments shared the cost of a director-level position, none of the departments were able to provide our team with documentation showing the need for the position or rationale for the funding arrangement. A third IDS we reviewed involved one department reimbursing another for a position functionally based in the second department but authorized and funded in the first.
Sup. Jackie Fielder, who chairs the Government Audit and Oversight Committee, released the audit today with a statement:
At a time when the mayor is proposing drastic cuts to our most critical social services, and trust in government is fragile, the City must hold itself to the highest standards of accountability. These findings highlight the importance of transparency, responsible budgeting, and making sure that every dollar is spent wisely. My commitment is to ensure that San Franciscans have a government that funds critical social services and uses public resources efficiently, effectively, and in the public interest.
So here’s another element of the budget battle: There’s money sitting around in department accounts that could be spent on other things. Some of that money may go for important programs—but if it’s left over at the end of the year, it isn’t going for anything.
