. - -'ll '1 nun F. .-. -. 1 r Til? HEM .z ?5 Special Audit Report Associated Black Charities, Inc. January 31, 2018 through April 30, 2019 TABLE OF CONTENTS Executive Summary Background Information Objectives, Scope, and Methodology SECTION 1: Findings and Recommendations SECTION II: Opportunities for Improvement Appendix I: Management?s Response to the Audit Report Hi tti this . .-. . .?Afii -. Honorable Joan M. Pratt. Comptroller and Other Members ofthe Board of Estimates City of Baltimore. Executive Summary At the request of Mayor Bernard ?Jack" Young. we conducted a Special Audit of the Baltimore City Children and Youth Fund (Program). administered through the Associated Blael; Charities. lnc. (ABC). The objectives of our audit were to verify that: l) administration of the Program complied with the Memorandum oft 'nderstanding (MOU) between Baltimore City (City) and ABC effective January 31. 2018: and (2) processes and internal controls relating to the Program were sufficiently designed and effectively implemented. As part of our audit. we evaluated the processes and internal controis at NBC pertaining to the administration ofthe Pin igt?um: examined the processes for soliciting and evaluating grantees: assessed the processes for monitoring the performance of grantees selected: and examined the controls for the disbursement of funds to grantees and subcontractors. The scope ofour audit was from January 31. 2018 through April 30. Elli?. As a result of our audit. we determined that awarding of the grants was not always consistent and grant award decisions were not sufficiently documented. Additionally. we identified the following matters as opportunities for improvement: I Site visits of grantees were not conducted as of April 30. 2019 0 There was no established time frame for grantees to complete award agreements. As a result. funds were not yet used for program objectives as intended. 0 Some grantees received second payments before the previous payment advance was completely spent. We noted that the program was set up in a way that grantees were to receive their funding as advances at a set time during the year assuming they met certain provisions. We wish to acknowledge the ABC management's cooperation extended to us during our audit. Respectfully. Josh Pasch. CPA City Auditor July 26. 2019 A Special Report on Associated Black Charities lnc. Background Information 1n November 2016. City voters approved a charter amendment establishing the Program. - The Program is a continuing. non-lapsing fund. to be used for new programs and services for Baltimore's youth. or to augment current programs and services. There will be a mandatory annual appropriation to the Program. and any unspent funds will remain in the Program. - The Program cannot be used to substitute for or replace funding for youth provided in the Fiscal Year 2017 Ordinance of Estimates. except to fund programs that would be discontinued due to lost grant funding. The Mayor and City Council are to prm-?ide oversight. governance. and administration of the Program in aeo-zdmee with Article 1. Section 13 of the Baltimore City Charter. the annual appropriation to the Program is to be equal on at least $0.03 on every $100 of assessed assessable value ofall property in the City. as reports--1 the State Department of .?\ssessments and Taxation as ofthe prior November. Grants and donaiions may also be made into the Program. 1n Fiscal Year 2018. the final appropriation to the fund was $12 million. Ofthe $12 million. $1.2 million as for administrative fees and $10.8 million was to fund grantees. The Children and Youth Fund Task Force (Task Force) was established to make recommendations on the Program's governance. facilitated by the Council President's Office. it was scheduled to meet regularly between February and May. The Task Force included community leaders. youth program services providers. and City government representatives. The key goal ofthe Program is to develop a strong infrastructure within the City's underprivileged communities to support programs for children and youth. The idea was to have the community in control of the program with no involvement of the government in the ultimate operation of the program. A committee of 24 City residents was chosen based on their experience with youth programming to evaluate grant applicants. it was determined that at least 4 0/0 of the review committee had to be under 30 years of age and of those halfhad to be below 24. Pursuant to Article 5. Subtitle 9 ofthe Baltimore City Code. the Task Force appointed the ABC as the interim ?scal agent to administer the Program. The MOU was entered into in January 2018 between ABC and the City to govern the administration ofthe Program. The ABC contracted with Frontline Solutions International. LLC (Frontline) and Urban Policy Development to help with the formation of a Request for Proposals (RFP). community outreach to potential grant applicants. and evaluation ofthe applicants for funding. The MOU was for the period beginning January 31. 2018 and through July 1. 2019 with the expectation of obtaining a permanent fiscal agent for the Program. However. the MOU was extended because the permanent fiscal agent was not selected. 2 A Special Report on Associated Black Charities lnc. The UPD facilitated the evaluation process by reviewing all applications to determine that they met the minimum application criteria. Once it was established that the application was complete. three reviewers were appointed to independently review and rate the applicants and respective proposals based on the criteria established by UPD. The final decision as to who would receive grants was based on the ratings and additional group discussions. The administrative portion ofthe grant was primarily used to pay Frontline. UPD. and the 24 grant reviewers for their services in developing an RFP. publicizing the Program. developing evaluation criteria and evaluating the grant applicants. The ABC also received payments for managing the program activities throughout the year. Many applicants required assistance in cornpl:ting the application process and administering the grants. To resolve this matter. SLZ million as and set aside to assist the grantees in meeting the Program?s requirements. In August 2018. the Program awarded $9.6 million in grants to 84 applicants. Receiving funding was contingent upon the gramme: Obtaining proper insurance: 0 Performing criminal background checks on all employees and volunteers working directly with children: 0 Developing a final budget and performance metrics for the program being prov ided: and 0 Entering into an agreement with a fiscal sponsor if the grantee was not a 501(c)(3) organization. After these four provisions listed above were met. a grant agreement was executed between ABC and the applicant/fiscal agent. Once the agreement was signed. the grantee was considered eligible for the first grant disbursement. Since many ofthe grantees were startup organizations. agreed to advance funds to allow them to initiate their operations. Grantees receiving less than 3250.000 received two payments and grantees receiving in excess of $250000 received three payments. in order to receive subsequent payments. the grantee is required to submit a quarterly report including: (1) Expense Report: (2) expense receipts: and (3) performance measure information. Lastly. the grantee is required to submit a final expense report with supporting documentation for expenditures by September 30. 2019. Lu A Special Report on Associated Black Charities lnc. Objectives, Sc0pe, and Methodology We conducted a Special Audit ofthe Program administered by ABC for the period ofJanuary 31. 2018 through April 30. 2019. We conducted our audit in accordance with Generally Accepted Government Auditing Standards. except for a peer review requirement. These standards require we plan and perform the audit to obtain sufficient. appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our ?ndings and conclusions based on our audit objectives. The objectives ofour audit were to verify that: ABC's administration ofthe Program complied with the MOU between the City and ABC effective January 3i. 2018: and. (2) processes and internal controls relating to the Program were sufficiently designed and effectively imp? :Lnented. To accomplish our objectives. we conducted inquiries of key individuals to obtain an understanding ofthe internal controls and related policies. processes. and procedures established by ABC and its Stibcmitrtisth's. We tested a sample of administrative expenditures. grant applications. and payments grantees. The issues ofeoncern and recommendations :15: -.l::ailed in the Findings and section and the Opportunities for improvements section of this report. Management responses are im "tied in Appendix l. A Special Report on Associated Black Charities Inc. SECTION I Findings and Recommendations Finding 1: Grant award decisions were not sufficiently documented to explain deviations from the standard selection process The grant award evaluation process begins with a scoring process: however. the ?nal grant award decision was made following a group discussion facilitated by UPD. This resulted in grants being awarded to lower tiered grantees and some higher tiered grantees not receiv ing awards. For example. our review indicated that 19 of the 84 grantees scored lower than 40 applicants who did not receive grants. There may be legitimate reasons to award these low er-scored grantees. These lower-scored grantees were awarded based on group discussion results: hr: er. there was not sufficient to support the group's ?nal grant award decision. Without sufficient Ll.Hetunentation. UPD. ABC. and the City cannot the fair and transparent grant av? ard evaluation process. Suf?cient documentation is necessas?; -, clearlyjustify grant award decisit ms and niinimize negative perceptions ofpublic and protests. by applicants who are not awarded. The Office of and Budget (OMB) Circular No. requireu management to maintain a system of control that provides reasonable assurance that the r-hiectives of the entity which includes the effectiveness and ef?ciency ofoperations are met. According to the Internal Control in the Federal Government issued by the United States Government .-\ccountability Of?ce by the Comptroller General of the United States. "Documentation is a necessary part of an effective internal control system. The level and nature of documentation vary based on the size ofthe entity and the complexity ofthe operational processes the entity performs. h'lanagement uses judgment in determining the extent of documentation that is needed. Documentation is required for the effective design. implementation. and operating effectiveness ofan entity?s internal control system." Recommendation 1 We recommend that the evaluation process suf?ciently document the ?nal decisions as to why lower-scored grantees were selected over other applicants. 'Jl A Special Report on Associated Black Charities Inc. SECTION II Opportunities for Improvement Opportunity for Improvement Site visits of grantees were not conducted as of April 30, 2019 The MOU between the City and ABC requires ABC or its designee to perform a site visit for each grantee within 12 months to evaluate performance or compliance. As of April 30. 2019 (nine months into the program). ABC did not conduct any site visits. Although the MOU requires a site visit witnin the 12 month period. performing the site visit earlier in the grant period would be more effective at identifying issues with the grantees performance or compliance. Recommendation lulu": ABC personnel or its designee conduct sh: ?x isits earlier in the grant period. Opportunity for Improvement 2: Setting time limit for entering into a grant agreement uniting to the award letter. ifthe grantee does not complete all next steps and meet outstanding award requirements in a timely manner. the Program will not be able to issue the grant award and ill have to rescind the initial award offer. However. neither the MOU nor the award letter establishes a time frame for completion of award requirements. As a result. we noted funds were not yet used for program objectives. For example. five grantees selected during August 2018 did not receive grant funds totaling $363.33} because they did not complete their grant requirements. However. these funds were not rescinded. Recommendation 2 We recommend that ABC establish a timeframe for grantees to meet the award criteria and rescind the awards so that the funds will be available to the other eligible grantees. Opportunity for Improvement 3: Timing of payments to grantees Ofthe 84 grantees. 2-1 had received second payments. Twenty of these 24 grantees received second award payments before the previous advance was completely spent. Providing funding in excess ofthe current operational needs increases the risk that the funds will be spent for purposes other than the Program. Recommendation 3 We recommend that ABC release succeeding payments only when funds are deemed necessary for the grantees to continue operations. A Special Report on Associated Black Charities lnc. Appendix I Management?s Response to the Audit Report Finding Grant award decisions were not suf?ciently documented to explain deviation from the standard selection process. Recommendation We recommend that the evaluation process sufficiently document tlze?nul decisions as to why lower scored grantees were selected over other applicants. Response: Respectfully. ABC does not believe that this Finding is supported by the record. I ?Deviation from the standard selection process? - All grantees were selected based on the clearly outlined criteria and factors set forth by the l?t?YF Task Force. which ere disclosed in the detailed in the Facilitators training L?Olsi communicated to the Community Reviewers; and followed in the selection process. No grantee was funded based on a "deviation from the standard selection process.? 0 It was alw ays known that grant applications ould aluated based on a multitude of factors. including ?a range of equity considerations. as equitable distribution of funds. and resources across geography. age and target population." ("See RFP at page 8.) Community Reviewers were specifically tasked with collectively ensuring that there was a mix ofgrantees that addressed needs identified in the City for youth who were underrepresented and to ensure a balance of programs and services. 0 The Auditors? Finding ignores the essential equity considerations that distinguish the BCYF. The BCYF was never intended to operate "business as usual." Per the recommendations ofthe BCYF Task Force. who understood and discussed the need for a process that would ensure equity be built into the selection process. grant application evaluation was not limited to raditional rankings. Instead. traditional rankings were just one part of the selection process. Specifically. as a preliminary step. all applications were ranked and divided into four tiers. Tier ranked applications with unanimous Community Review er support were funded. Then. Tier ranked applications without unanimous agreement ere included in the Tier 2 and Tier 3 review and discussions for potential funding. Finally. community reviewers could determine if any Tier 4 applications should be discussed for funding. These second and third steps allowed Community Reviewers to seek consensus on which. if any. applications should be funded to accomplish the Fund's equity and inclusion mandate. 0 Sufficient Documentation - The Auditors were provided significant documentation of the deliberative process of the Community Reviewers. The records provided included extensive notes of the multiple discussions supporting the final decisions made by the Community Reviewers. 0 While we believe that the records provided were more than suf?cient to support all funding decisions already made. the Fund will nonetheless continue to strengthen record keeping for future funding cycles. For example, the next application review process will include a ?decision 7 document" for the Community Reviewers that re?ects the multiple levels of review and identi?es the speci?c eqrrity and inclusion reasons. if any. for approval or denial of funding. Those decision documents will then be collected and digitally stored after the group discussion and would become the documentation for the group's collective decision. Opportunity for Improvement Site visits ofgrc?mtees were not conducted as oprril 30. 2019 Recommendation We recomttiend.tBC'persotme/ or its desigtzee conduct site visits earlier in the grant period. Response: 'r The Auditor?s recommendatiam assumes that the only interaction with a grantee is through a single ?site visit." The reality is that grantees are engaged in multiple ways by various members ot?the BCYF team both or. site and ot?t?t?rom award to close-out. Had the Auditors reviewed the technical assistance ?les. they would have learned more about the various levels ot?engagenient and oversight that is built info the BCYF. The very intent ofthe Youth Fur; is to ensure that the grantees. especially the startup and new programs. receive significant. wag-port and opportunities to grow their capacity. TAs engage intensively with grantees as nit-ans of supporting them in both their administrativ -- eta-.1 program responsibilities. Thin hits a core element ot?the Youth Fund Task Force understan ting that to achieve equity the grain-es would need more than just access. but also support. From the beginning grantees receii ed support on how to re?ne their program metrics to capture the critical information to measure their program activities. Their program reports are reviewed against their metrics. Their tiscal reports are reviewed against their budgets and must include supporting documentation. there is a team of senior leadership (consultants) who routinely meet to discuss the grantees? successes and any challenges. Then additional appropriate efforts are made to support the grantees including linkage to other hinders. other capacity building opportunities. linkage to other programs. group training/information sessions. and linkage to other potential partners as well as specialized assistance such as ?nancial reporting. These are ongoing regular discussions among the entire team to support the grantees? program and compliance responsibilities. If the Fund is to operate using a traditional model of multiple site visits along with the collaborative process designed to be a core part ot?this strategy. additional resources would be required to hire a minimum of four portfolio managers for a grantee pool ot?the existing size. Opportunity for Improvement ettiug time limit for entering into grant agreements Recommendation Recommend that ABC establish a timeframejor grantees to meet the award criteria and rescind the carards so that the?mds will be avaiIah/e to the other eligible grantees. Response: i We believe this recommendation does not acknowledge the intent of the Youth Fund and the recommendations ofthe Youth Fund Task Force. The Task Force was clear that some grantees were going to need assistance in moving into this opportunity to provide services and make a 8 difference in their respective communities. And this assistance would notjust be limited to the application process but also. ifthey were selected. they may need assistance in obtaining the necessary compliance tools. such as insurance. background checks. ?scal sponsors. etc. We must be willing to orl\ through challenges to build long term capacity in our communities. Out of8?l funded grant applications. only one necessitated a letter rescinding the funding since this grantee could not obtain the necessary insurance despite multiple efforts. Depending upon number ofgrantees and their need for support in any single selection process. unless additional resources are identified. it may not be feasible to award the ?rescinded" funds to the next eligible grantees until the initial group of grantees are well established. on boarded and fully operational. Opportunity for Improvement Timing grantees Recommendation NT: that ABC release succeeding pcn'rnenfs only it fun finals are deemed necesswfi?for Iii-J -i Io operations. Response: This recommendation. if implemented. will require an additional landing. to monitor the l?aidgets and expenditures. It might be more efficient to haye the grantees? initial budgets establish project;.1 expenses outside of the operational costs based upon the program design and show the projected expenses over the grant cycle. The new intermediary could provide additional support during the application process going forward. but it should be anticipated that additional support will be needed for some grantees post grant award.