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Baltimore Youth Fund audit, ordered in connection with Healthy Holly book sales, raises transparency question

An audit of Baltimore’s Children and Youth Fund launched in the midst of the Healthy Holly scandal found that the charity selected to run the fund didn’t have sufficient records to demonstrate that it gave out money in a way that was “fair and transparent.”

The Baltimore Sun on Wednesday obtained a copy of the audit report, which has not been publicly released.

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The auditors made several recommendations for improving management of the $13 million-a-year fund.

In a written response to the auditors, Associated Black Charities, the organization that manages the money, rejected the finding that awards weren’t properly documented, even though a consultant involved in the process told The Sun that not all the reasons for final funding decisions were written down.

In a separate statement, ABC President Diane Bell-McKoy said Wednesday that the report confirmed that the youth fund “has been carefully managed by ABC and its team of professionals.”

“From Day 1, ABC has partnered with professionals, volunteers, young people and concerned community members to ensure the process was responsive to and inclusive of the community,” Bell-McKoy said. "We are proud to have prioritized community involvement in every phase and aspect of this work, as mandated by the Youth Fund Task Force.”

Democratic Mayor Bernard C. “Jack” Young ordered the audit this spring, when serving as acting mayor while Democrat Catherine Pugh was on a leave of absence before her eventual resignation. He took the step after Associated Black Charities was revealed to have made purchases of Pugh’s self-published children’s books. The organization raised $90,000 from other entities and used it to buy and distribute 10,000 copies of Pugh’s books, keeping $10,000 for itself.

The report does not mention any improper political influence over the way ABC distributed the fund’s money to community organizations. Voters approved the creation of the fund in a 2016 referendum, and it receives a guaranteed portion of the city’s tax revenue each year.

The audit is the second completed of the multiple reviews and investigations announced after The Sun disclosed the “Healthy Holly” book deals in March. Pugh resigned in May after federal authorities raided City Hall and her home, and the Office of the State Prosecutor launched a criminal investigation.

The audit of Associated Black Charities was scheduled to be publicly discussed Wednesday by the city’s Board of Estimates, but the discussion was deferred without explanation. Representatives of the charity who attended the meeting confirmed they had a copy of the report, but said it was up to the city to release it.

At his regular weekly news conference, Young told reporters that the issues identified by the audit were to be expected with any new endeavor and that he was comfortable with the charity continuing to oversee the fund.

“I have every confidence that going forward things will work out properly,” Young said.

The audit was initially expected to be finished by June 30, the end of the previous fiscal year. But its completion was delayed by a May 7 ransomware attack that shut down city computers. The City Council moved ahead with extending Associated Black Charities’ management of the fund for another year before seeing the results of the audit.

Associated Black Charities received $1.2 million in fiscal year 2018 to cover the cost of administering the fund and said in its response to the audit that acting on the report’s recommendations would require more money. It was not clear whether the charity would seek to increase the share of the fund that it uses for administration in coming years.

More than $37 million has been put into the fund, but only a fraction of that has so far been used for grants. A second round of grants is not expected until the winter.

City auditor Josh Pasch examined how the charity distributed $9.6 million to 84 community organizations in August 2018. The biggest awards were $300,000 each, while a group of smaller organizations received an average of $17,000. The money is supposed to be used by programs that will help young people take on leadership roles in society and generate economic opportunities.

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Special Audit Report

The auditors found that 19 of the organizations that received funding had lower assessment scores than 40 groups that were passed over for grants. The final decisions on which groups would get money were made after a group discussion organized by an Associated Black Charities contractor called Urban Policy Development.

“We determined that awarding of the grants was not always consistent and grant award decisions were not sufficiently documented,” Pasch wrote.

The auditors found while there “may be legitimate reasons to award these lower-score grantees,” the outcome of the group discussions weren’t properly recorded. Without that documentation, the auditors wrote, the charity and the city “cannot demonstrate the fair and transparent grant award evaluation process.”

“Sufficient documentation is necessary to clearly justify grant award decisions and minimize negative perceptions of public and protests by applicants,” the auditors wrote.

In its response in the audit, the charity said the auditors got it wrong.

“ABC does not believe that this finding is supported by the record,” the charity wrote. The fund was “never intended to operate ‘business as usual’” and auditors overlooked “equity considerations” baked into the way the fund works, Associated Black Charities said.

Douglass Austin, the president of Urban Policy Development, acknowledged in an interview that not all the final decisions about which groups to give money to were written down. But he said auditors appeared to have misunderstood the objectives of the fund, which was to give grassroots organizations a chance to get financial backing.

“This wasn’t a typical city procurement process, by design,” Austin said. “This is one of the most frustrating aspects of the audit. It seems to ignore the whole purpose of this fund. It wasn’t just to provide money to the highest-rated proposals.”

Nonetheless, Associated Black Charities said in its response to the auditors that it would strengthen record keeping.

The auditors also found three “opportunities for improvement.” They reported that as of April 30, organizations that received money had yet to receive required site visits; $260,000 had yet to be turned over to the awardees because they hadn’t followed criteria for receiving it; and some organizations got second payments from the fund before spending all of their first payments.

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