Financial woes at Strong City Baltimore are creating big problems for vital community programs it is supposed to support

Saran Fossett’s youth summer program in Baltimore, Aziza/Pe&ce, was entering its final stretch last year and there were still expenses to meet.

A group trip to Arundel Mills to see “The Lion King” was set, as was a catered lunch of African-themed foods. Fossett needed to pay her youth employees, her business partner and herself.

Then, she said, word came from her financial managers at Strong City Baltimore: She’d run out of money.

Just weeks earlier, Fossett said, they had assured her she had more than enough funds.

Within months, she said, they were telling her she owed them $60,000.

“I didn’t pursue any more funding, because I didn’t want them to handle any more money,” Fossett said. Though her organization continues to operate, she wants more clarity from Strong City before seeking money for further initiatives.

As Fossett’s program grew rapidly in recent years, Strong City was managing her funding as a “fiscal sponsor." Smaller and less established organizations are frequently required to have such sponsorship to obtain grants.

Now, she and dozens of other grassroots organizations in Baltimore say Strong City’s accounting of their finances is hopelessly in disarray and upending important community work involving at-risk, mostly Black children.

Strong City manages funds and administrative tasks for more than 150 small programs as a fiscal sponsor. In 2019, it managed $14 million in assets, the organization said. Last month, amid reports that a coalition of groups was demanding answers, Baltimore’s Inspector General launched an investigation into its finances.

Strong City acknowledges that rapid growth led to problems but blames other factors. It says the May 2019 ransomware attack on Baltimore slowed its work, as did delays in disbursing Baltimore’s Children and Youth Fund in part because of the fallout last year of former Mayor Catherine Pugh’s Healthy Holly scandal.

But interviews with clients and a review of tax documents and other records show Strong City’s problems are deeper and have been going on far longer that it has acknowledged. The head of a former partner organization describes missed payrolls, weak accounting and general mismanagement going back to at least 2017. Some of Strong City’s partner organizations have ceased operating because they can’t access their own funds that they say they are owed.

Strong City celebrated its 50th anniversary last year and moved into a new East Baltimore headquarters meant to cement its expanded role as a citywide organization.

But it is now reeling. Its longtime chief executive officer stepped down in March, one of a stream of key departures that continues. Organizations that provided funding to Strong City and its projects have hit pause, while grassroots groups are fighting to extricate themselves. The pandemic has compounded matters.

“Our systems just haven’t been able to keep up with both the volume and complexity of the work,” said Georgia Smith, the chair of Strong City’s board of directors. “We recognize that, and we’ve been trying to get the right people as well as the right systems in place to make sure that we don’t stay in this state.”

Funders are watching to see what happens.

“We don’t permit anybody to use them any longer, at least for the moment,” said Robert Embry of the Abell Foundation. Added Matt Gallagher of the Goldseker Foundation: “We’re watching this and monitoring it like everybody else."

Danielle Torain has seen Strong City’s struggles, both as she helped to administer the Baltimore Children and Youth Fund and now as executive director of the Open Society Institute, which provides grants to groups through Strong City. She said the problems highlight a larger issue of how public dollars flow to community-based initiatives.

After the 2015 uprising, she said, there was a surge of interest in funding work to support youth and communities. “And we weren’t acknowledging the extent of which we needed to rely on fiscal sponsors to make it work,” she said.

In a written response to questions from The Baltimore Sun, Interim CEO Reginald Davis acknowledged that the organization has had trouble with its rapid growth.

“I have been clear from the start with our stakeholders and projects that in addition to more effective communication, improvements have been necessary to upgrade our internal capacity and systems to meet the demands created by significant growth in the number of projects we sponsor,” Davis wrote.

Asked about Aziza/Pe&ce, Davis wrote, “Some projects spend more than what they bring in.” He acknowledged that Strong City’s advancement of funds to some groups is not a best practice, but said groups must repay such advances even if a grant they expected did not come through.

Long-standing problem

Fagan Harris knew by 2017 that he had to get his organization, Baltimore Corps, away from Strong City. Over the following 18 months, he said, he undertook a clandestine effort over Strong City’s objections to pull out.

As his “fiscal sponsor,” Strong City took a percentage of his revenues to provide financial management, human resources and legal support. Many small programs are not registered as 501c3 nonprofits and so legally can’t accept certain types of funds.

“We had to call our donors and ask them to stop giving us money because we had no idea where the money was going.”

—  Kim Sauer, co-founder of Fearlessly Loving Yourself

Funders might also be wary of giving cash to groups with a short track record. Fiscal sponsors take on the financial, human resources and legal aspects so program leaders can focus on their mission in exchange for 10% to 15% of their revenues.

“The biggest problem in the nonprofit sector is too many people start organizations without being able to show demand and a financial sustainability path for the organization,” said Peter Frumkin, a professor at the University of Chicago who is an expert on philanthropy and nonprofit management. “In many cases it is very wise to start out using a fiscal agent as an intermediary to receive funds.”

Baltimore Corps works to bring talented people of color into public service roles in the city. During its time with Strong City, Baltimore Corps had grown from taking in $300,000 a year in 2013 to more than $3 million by 2016. The time was right for Baltimore Corps to become its own nonprofit. But Harris said that move, perhaps inevitable, was accelerated by problems he was experiencing with Strong City.

His payroll checks wouldn’t be cut in time, and they didn’t provide him timely financial statements, he said. Human resources tasks like offer letters, personnel files and background checks would be late or have mistakes, he said.

“It was just a poorly run operation, and unfortunately this dragged on for years,” Harris said.

Davis, who joined Strong City in November as chief of staff, noted that Baltimore Corps had left Strong City by the time he arrived. But he said he promptly spoke with Corps leadership, and those discussions informed Strong City’s retooling of its accounting, communications and other systems. “By January, we were once again distributing financial statements on time,” he said.

Expanding scope

Strong City began in 1969 as the Greater Homewood Community Corp., created to stabilize the neighborhoods around the Johns Hopkins University campus after the riots following the death of Martin Luther King Jr. For decades, it acted as a fiscal sponsor for a handful of community groups while running an adult learning center. Over the years, it began expanding beyond Charles Village.

“I’m not an accounting guy, but I know addition and subtraction. A lot of the numbers they were providing me just didn’t make sense.
When you make promises to these kids, they’re expecting us to come through.”

—  William Tipper Thomas, client of Strong City

Around 2015, it changed names to reflect that broader mandate and decided that fiscal sponsorship would become a more significant part of its operations.

Tax documents show that the organization’s total revenue ballooned from $5.4 million in 2014 to $12 million in 2017. Strong City says on its website that in 2019 it managed $14 million through fiscal sponsorship alone.

The sponsorship work "expanded for numerous reasons, but largely because people asked us to do that, and it made sense to do it,” said Karen Stokes, who left in March after more than 13 years as Strong City’s executive director. “We also started formalizing it. In the very beginning it wasn’t a very formal program at all. Even so, maybe the first five to six years of it, it was done really as a service.”

In 2018 Strong City was named one of two preferred fiscal sponsors for grassroots organizations applying for grants through the city’s Children and Youth Fund, which is $12 million set aside from property taxes annually to boost programs for children. Strong City would eventually manage funds for more than 150 programs.

Rosheda Harrell and Kim Sauer created Fearlessly Loving Yourself in 2018 to mentor girls in Southwest Baltimore and were one of the youth fund’s first recipients, claiming a $20,000 grant.

“From the very beginning, there seemed to be difficulty with communication and receiving timely training and professional development as promised,” Harrell said. "While we were trying to navigate that, we were assigned four different project managers. Every time we tried to get the ball rolling, we were reassigned to another project manager.”

Strong City wouldn’t provide them with detailed financial reports, she said, and Harrell and Sauer felt their questions were being brushed aside. Once they got the program up and running in June 2019, however, “everything came apart,” Sauer said.

Vendors, contractors and even their property manager weren’t being paid, they said. They decided to take a closer look at how Strong City was managing their funds.

“Once we did, we came to find out anything you can imagine that is wrong was wrong with our account,” Harrell said, including duplicate and erroneous charges.

“We had to call our donors and ask them to stop giving us money because we had no idea where the money was going,” Sauer said.

Asked about Fearlessly Loving Yourself, Davis again pointed to the ransomware attacks and Strong City advancing funds. He wrote that partner groups are sometimes unclear on the rules of “how they can spend the funds” and that Strong City is “addressing this with new expertise on staff and new accounting processes.”

Former city schools physical education teacher Kevin Anderson partnered two years ago with Strong City for support when his after-school health and fitness program, NewFIT, grew too large for him to handle on his own, with a staff of 50 and programs in dozens of schools. “I had been given the impression that Strong City could take on those parts of the organization and I could just navigate the part I love, my passion: creating these experiences and programs and continuing to grow,” Anderson said.

Anderson said his portfolio managers changed often, and from the beginning in early 2018 his financial statements were inconsistent and showed him in a deficit. “They were saying, ‘We have a lot going on. Don’t worry about it. We know what your budget is. We’re just catching up on our receivables,’ ” he said.

The Baltimore Brew first reported on Anderson’s situation and broader questions about Strong City.

Strong City should never let any program get into the red, Anderson said. “It’s not like anybody has their own checkbook — all transactions have to be authorized by Strong City. It should never get to that point.”

Davis acknowledged staffing changes and said the group has recently hired more experienced accounting staff.

Anderson, Harrell and Sauer are part of a coalition demanding answers. Among them is William Tipper Thomas, who runs an engineering program to engage middle school-age children in science and math. He paused his program in August 2019 out of concern that Strong City wasn’t managing his funds properly, and worried that continuing his operations could make the situation worse.

“I’m not an accounting guy, but I know addition and subtraction. A lot of the numbers they were providing me just didn’t make sense,” Thomas said. “When you make promises to these kids, they’re expecting us to come through.”

Davis said earlier this summer that organizers with 19 of Strong City’s 156 projects had expressed concern and the challenges were mostly related to communication.

“What we heard from our projects is that they wanted us to communicate and communicate often, and so we’re trying really hard to do that in a number of ways,” he said.

The Sun found other programs that chose not to join the coalition of 19 who nonetheless say Strong City mismanaged their funds. One of them was Tonee A. Lawson, who runs a children’s program called Be. She has been focused on divesting from Strong City and continuing her work.

“It’s just not a good use of my time. It’s caused my program to suffer, and ultimately I’m here for the children we serve,” Lawson said.

Stokes said that in the beginning of its sponsorships, Strong City was charging 4% on the funds managed for each group. She said it should have been charging as high as 15%.

She also said Strong City advanced money to organizations before it was in hand from the project funders.

Davis added in a written response that advancing money increased strain on the organization, especially after the ransomware attack and COVID-19.

Kim Trueheart, who is a member of Strong City’s board of directors and also a client, said her program’s funds have been frozen, but said it was because the government agency that funds her told her she had not filled out her application correctly. She said problems aren’t just the fault of Strong City, but funding sometimes not coming through as expected.

Rising rent

It wasn’t just fiscal sponsorship that put Strong City on shaky ground, but other risky ventures as well. It absorbed a program called The Club at Collington, a heralded community center that serves children in East Baltimore. But Strong City noted in its most recent annual report that the program was losing $300,000 annually, and under its stewardship had only been brought to a “nearly balanced budget.”

Meanwhile, Strong City spent years working on leaving its longtime home in Charles Village for the Hoen & Co. lithograph building in East Baltimore. It had long needed more space, and its mission had expanded citywide, to helping programs in underserved communities. After renting for decades, officials hoped owning their own space would give them access to larger capital.

Developer Cross Street Partners and Strong City teamed up, with Strong City’s nonprofit status helping Cross Street access much-needed tax credits and loans for the project, whose price grew from $26 million to about $30 million.

William Tipper Thomas, who runs the engineering program for middle schoolers, said the move to the Hoen & Co. building raised eyebrows. “Everybody’s financials are screwed up, and they buy a brand-new $20 million building. How does that work?” Thomas said.

Stokes insists that the building is not causing Strong City’s problems. “The biggest goal was to make sure there was no risk for the nonprofit of Strong City, that there’d be complete separation,” Stokes said. She said they are only tenants now, with the option to buy after seven years.

But Del. Regina Boyce, who was director of Strong City’s Adult Learning Center until December, said the building caused rent expenditures to soar. She said the Adult Learning Center’s rent alone tripled.

“We were limited in space and limited in programming [in the old building]. It’s great we have this space, but I was asking the question: Who’s going to pay for this?” Boyce said. “I remember no one being excited because it was too fast. It seemed like it made sense one day, and the next day it didn’t make sense.”

John Renner, of Cross Street Partners, said in an interview that he couldn’t get into specifics about whether Strong City is meetings its monthly rent payments but that the organization “is doing just about as well as any nonprofit organization in our portfolio during the COVID era (and better than retailers).”

Looking back on her tenure as executive director, Stokes says she’s not ready to say whether she has regrets.

“We were aggressive in our growth because of our mission. We did it out of the sake of believing we could make a difference,” Stokes said. “Was it perfectly executed? No. Could we have done it better? Maybe. We did the best we could.”

Board chair Georgia Smith said Strong City is reevaluating its scope.

“We’re taking a look at, given our capacity and our systems with the improvements we’re making, what makes sense in terms of the numbers and the size of the funding sources,” Smith said. “We haven’t made any decisions about it yet.”

Harris, of Baltimore Corps, said the mostly white-run Strong City did a disservice to its mostly black-run programs.

“Black leaders across the city have to meet a higher threshold of performance, and these kinds of problems reflect poorly on the leader and makes it even harder for leaders of color to do their jobs,” Harris said. “I don’t know that this predominantly white organization understood that or took it seriously, because if they did, they would not have let this level of incompetence persist for as long as it did.”

Saran Fossett and her business partner at Aziza/Pe&ce parted ways amid problems with Strong City. Determined to keep the program going, Fossett took a job with the school system that lets her provide similar services.

“My organization will never stop,” Fossett said. “I will continue to grow.”