Ellen Shershow Peña / via mayorgavinnewsom on Flickr

Luis Cancel (right) and former mayor Gavin Newsom present 2010 Annual Art Award to Carlos Santana

In late November, the San Francisco Arts Commission released an audit that found widespread problems inside the city department — unhappy employees, poorly managed administrative accounts, and a general lack of accountability under former director of Cultural Affairs Luis Cancel, who resigned under a cloud of controversy in July.

But one program stood out to the controller's office: the Cultural Equity Grant. Among other issues, the audit found that over the past five years, the program has dispensed almost half a million dollars to an organization that isn't even based in San Francisco — the Center for Cultural Innovation, which has a branch on Market Street in addition to its headquarters in Los Angeles. 

"Believe me, that was the part of the audit that jumped out to me," said PJ Johnston, head of the S.F. Arts Commission, "I was shocked to see the $477,000 number." 

The review noted that the Center for Cultural Innovation has gotten seven grants since 2007 from the Cultural Equity Grant program, the major grant-giving program in the department that awarded $2.2 million last year.  In addition to being a questionably local organization, the Center did not receive its money through a "competitive" process — ie, a public, peer-reviewed panel —  required by the department's rules. Also, the CEG isn't supposed to dispense money to organizations whose annual budgets are over $1 million, which is the case with the Center. 

The fact that the L.A.-based organization, which is devoted to helping artists share knowledge and get business tools, is the Arts Commission's most-funded group surprised many, including those inside the department. Compared to other organizations named by the audit as multiple recipients of CEG — such as Galeria de la Raza and the Queer Cultural Center — the Center for Cultural Innovation cut a much lower profile in S.F.

"I've never heard of it," said Debra Walker, former head of the S.F. Arts Task Force, "Nobody I know has benefitted from it."

The head of the art commission's grants program, San San Wong was listed on the organization's website as a trainer, but she said that was a result of a one-time workshop session that she led in 2008 without financial compensation — "technical assistance to artists and arts organizations" is a regular part of her job. She is also thanked in the non-profit's 2005 annual report; Wong said she gave $20.

The Arts Commission said it is investigating how exactly the Center got so much money without a public grant process.

"In response to your questions about whether or not Luis Cancel or any other employee of the SFAC had a relationship with the Center of Cultural Innovations, that is a great question and is one that, in response to the Controller’s report, we are looking into," wrote Kate Patterson, public relations manager, in an e-mail.

The controller's office also drew attention to another issue—how the CEG distributes its grants.  It found that funds were being concentrated in a few organizations, a contention that has upset some local arts groups.

After the Chronicle published a short item on the report, arts groups have mobilized to combat what they perceive to be an attack on the CEG, a beloved grant program. Galeria de la Raza, which is cited for receiving 12 grants from the department over five years, circulated a letter pointing out that the SF Symphony "annually receives almost as much funding from the San Francisco Arts Commission as the entire budget of the Cultural Equity Grants program" —an issue not addressed in the report.

"These organizations need funding from the city they can rely on," said Michelle Tea, whose organization, Radar Productions, has gotten six grants over a five year span. "The grants are highly competitive. There were countless grants we didn't get."

"There was no defense of Cultural Equity in the report, whether or not it was their intention," said Krissy Keefer, artistic director of Dance Brigade, who has also gotten six grants over the years. "They fumbled their own efforts."

A website has been set up, Cultural Equity Matters, to raise awareness about the situation and this past Tuesday, a group of 30 or so arts groups met in a conference room at Yerba Buena Center for the Arts to discuss the audit. A protest is scheduled to take place at SFAC's next meeting on December 5th for community members to speak directly to the commission. (The Arts Commission said that on Dec. 12, a general meeting will be held for public comment on the audit.)

But both Johnston and JD Beltran, the interim head of the SFAC who asked for the audit this summer, after Cancel resigned, said that the program was not at risk for elimination.

"We are in no way looking at dismantling the Cultural Equity Grant, cutting funding, pulling grants or anything else," Johnston said.

In fact, Beltran noted that under Cancel, the administrative costs of the program had ballooned from $215,000 to almost $600,000. There is a chance, she said, that some of those funds could go toward grants if the administrative costs are streamlined.

"The most important point to convey is that (CEG) is a program with very strict guidelines on how it's run," said Beltran, "The prior director decided to make one program the granting arm of the whole agency." When Cancel added four grant categories to the existing four, that was an action that violated the legal authority of the program, according to Beltran.

Johnston also said that while he understood that arts groups felt targeted by the audit, the CEG was only one part of the report. 

"The controller's audit is intended to clean up our own house," he said, "There is a great deal of emotion and acrimony being whipped up over controller's office's very appropriate function. Some of it is misguided."

Andy Wright contributed reporting.

Correction: A previous version of this story incorrectly stated the meeting dates for the SFAC and General meeting as Dec. 3 and Dec. 15.