The nonprofit group responsible for managing millions of dollars in grants from Baltimore’s Children and Youth Fund lacked protocols to ensure the grant funding is being spent appropriately, according to the Office of the Inspector General.
After investigating a complaint that claimed a 2018 grant recipient had “misappropriated funds,” the office “found there is a lack of compliance protocols in place to ensure the grant funds are being spent according to the award," according to a report released Tuesday.
The complaint alleged that an unnamed grant awardee who was scheduled to receive $16,780 through the fund built “inadequate facilities lacking electricity, exposed wiring and an inoperable" heating and air conditioning system. The report says the grant was for heating, air conditioning and hot water heater upgrades for the building.
When investigating the claim, the inspector general found a conflict of interest after discovering the awardee was the owner of the facility and lived on the second floor — without the required permit — thereby personally benefiting from the upgrades at the building.
The grantee also failed its last building inspection, in November, the city’s Department of Housing and Community Development confirmed in the report.
Associated Black Charities, the nonprofit that manages the fund, wrote in a statement that the grant was approved during the first round of funding in 2018 “to bring new programming to young people in an under-served area of West Baltimore" and that the grantee was suspended pending the completion of the inspector general’s investigation.
President Diane Bell-McKoy said the money was for a grantee running martial arts gymnasium who wanted to teach children’s classes. The money was supposed to fund mats and martial arts clothing in addition to the heating and air conditioning installation, she said.
Bell-McKoy said the vast majority of those who were awarded grants through the fund have been in compliance with the requirements tied to the grants and that some are now seeking additional funding from outside sources to expand on their programs.
She added that due to the nature of the program — where the nonprofit is coordinating with youth communities in under-served, majority black neighborhoods and giving grant money up front instead of through reimbursements — the nonprofit has had to be active in offering technical assistance to grantees to navigate the process.
Because the program is new and eschews more traditional grant funding allocations for a more community-based approach, Bell-McKoy said she hopes people will see the report more as a crack in the system that could be filled rather than one endemic of a system that doesn’t work.
“There are challenges for this program because it’s so innovative,” Bell-McKoy said. “If you can build this over a period of time, you build a stronger infrastructure."
Associated Black Charities wrote in its statement that it halted the second-half of the funding for the project and, now that the investigation is complete, “the next steps for this grantee will be determined after consultation with ABC’s legal counsel.”
“We welcomed the investigation and share the Inspector General’s commitment to ensuring that all public funds are being spend appropriately and effectively,” the group wrote.
Mayor Bernard C. “Jack” Young, who championed the fund’s creation when he was City Council president, said Wednesday the vast majority of grantees are using the money in right way.
"We will be keeping our eyes on it,” Young said. “This person who didn’t follow the rules, the grant was taken from them.”
After voters approved the creation of the youth fund through a 2016 referendum, Associated Black Charities was contracted to handle the$12 million fund, while taking $1.2 million in administrative fees. In 2018, the fund awarded $9.6 million in grants to more than 80 groups. Months-long funding delays worried some grassroots organizations, although disbursements are expected to continue this week.
As of July 1, Associated Black Charities will no longer manage the fund, as their role was always meant to be temporary while they search for a permanent intermediary to run the fund.
The nonprofit was caught up in the scandal surrounding former Mayor Catherine Pugh’s business dealings after the group agreed to distribute thousands of the former mayor’s “Health Holly” children’s books. The nonprofit collected nearly $90,000 from five entities to buy and distribute 10,000 books, while keeping $10,000 for the charity. Pugh pleaded guilty in November to federal conspiracy and tax evasion charges related to the sales of the books.
A July audit of the fund’s management, ordered by Young in the wake of the “Healthy Holly” revelations, found that Associated Black Charities didn’t have sufficient records to demonstrate that it gave out money in a way that was “fair and transparent.”
Comptroller Joan Pratt, whose office oversees audits, said Wednesday the city review did not address the problem with the grantee highlighted by the inspector general’s report.
“Audits don’t necessarily find everything,” she said.
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The inspector general wrote in the Tuesday report that Associated Black Charities disbursed two checks to the grantee: one for $1,656.25 to cover insurance costs and another $8,390 check on Dec. 28, 2018.
In addition, Associated Black Charities had initially only approved $7,023.91 of the $8,390 check sent in December, the report says, but the nonprofit “did not require the Grantee to provide expense justification documents prior to requesting additional grant disbursements.”
In response to the report, Henry Raymond, the city’s Chief Financial Officer, wrote that Associated Black Charities suspended the grantee as of Nov. 6.
Raymond said the nonprofit “indicated that documentation is required and grantees know that any budgeted item without proper documentation is not an acceptable expense.”
Baltimore Sun reporter Talia Richman contributed to this article.