Audit of Downtown Partnership of Baltimore raises ‘potential fraud’ concerns

BALTIMORE (WBFF) — A recent audit of the Downtown Partnership of Baltimore is raising concerns about the organization’s financial management, with an auditor writing that lax protocols could have led to errors or even “potential fraud.”

DPOB oversees the city’s central business district and raised more than $6 million in taxes, along with millions more in grants and contributions during the 2024 fiscal year. Downtown Partnership also spent $1.1 million in federal COVID funds that year, which triggered what’s known as a “single audit.” It’s more rigorous than a typical audit and is required for organizations that took in more than $750,000 in federal funds for the 2024 fiscal year.

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One accounting professor described DPOB’s fiscal 2024 audit findings to Spotlight on Maryland as “terribly concerning,” especially given the large amount of taxpayer funds that the organization manages.

The auditor said the “possibility exists of financial statement errors or potential fraud occurring and not being detected.” This was due to what the audit described as a lack of timely account reconciliation in the 2024 fiscal year, which means DPOB wasn’t doing the proper checks to ensure it had accurate financial records.

They also said they found “no documented policies and procedures over procurement, suspension and debarment” – meaning DPOB didn’t have a standard process for making purchases, distributing money to vendors or ensuring it avoids working with faulty contractors. A procurement policy did become effective the day after the end of the 2024 fiscal year, on July 1, 2024.

Erica Harris, an associate professor at Florida International University’s School of Accounting, said having such policies in place helps protect an organization from conflicts of interest or sweetheart deals.

“I’ve heard of nonprofit fraud where organizations will have contracted for products or services, and it’s contracted with a friend or an acquaintance or somebody that they’re connected to, somebody who’s collaborating effectively in the fraud,” she said. “And the monies will be dispersed, and then either the goods will never be received, or the goods will not be everything that the organization necessarily paid for.”

Downtown Partnership is a 501(c)6 nonprofit that takes in a large amount of public funds, including surcharge taxes from commercial property owners through its Downtown Management Authority arm. DPOB President Shelonda Stokes earned $317,000 in compensation, and nine other senior employees earned between $100,000 and $160,000, according to the organization’s Form 990 filing for the 2024 fiscal year.

According to the audit, DPOB raised $6.5 million in taxes and $4.7 million in grants and contributions in the 2024 fiscal year. DPOB’s annual report also notes a $12 million allocation from the state that same year, which DPOB spokesperson Greg Tucker said the organization has not yet received, and the funds were not referenced in the audit.

There also was a huge influx of federal dollars. The audit said DPOB spent $1.1 million in federal COVID funds through the American Rescue Plan Act, without proper protocols in place to administer the funds.

“So if you get a lot of money really fast, and you don’t have the infrastructure to be able to handle that, that’s certainly an opportunity for fraud, certainly an opportunity for mismanagement, right?” Harris said. “And, you know, an organization that develops or grows really quickly is certainly at risk for those kinds of things.”

According to the audit, the problems were caused by “significant turnover” in DPOB’s finance department over the prior three years.

Getting ‘back on track’

In its documented response in the audit report, DPOB said it has a new procurement policy in place and recently hired an outside consultant who is “working on getting the finance department back on track.”

In an email to Spotlight, Tucker said the consultant’s recommendations have been implemented. He also noted the appointment of a new vice president of finance, Sundeep Kohli, in July of last year, saying Kohli brings more than 15 years of financial management experience to the organization.

Allegations against former finance employee

Other sources provided more details about the organization’s financial problems.

Daren Williams, who served as a temporary controller for DPOB, said that when he joined the organization in August of 2024, he found that another finance department employee hadn’t been producing monthly financial statements. He and another former Downtown Partnership employee said the organization’s lack of record-keeping meant new records had to be created for the auditors, leading to several months of audit delays.

Williams also said that this finance department employee had been overbilling the organization for his own paychecks, an allegation that was echoed to Spotlight by two other former employees. Williams said he directly investigated the issue during his time at DPOB, but Spotlight could not obtain records to verify the alleged overcharging.

Williams said it was only after he started raising alarms that Stokes, DPOB’s president, gave the employee the option to step down.

Asked about the allegations, Downtown Partnership said it doesn’t discuss personnel matters with external parties or with the news media. Spotlight attempted to contact the former finance department employee for comment but could not reach them.

Mayor’s office reviewing audit

Mayor Brandon Scott’s office said it is aware of the DPOB audit, which was required to be made public since it is classified as a single audit. The mayor’s office said it has a “rigorous” review process for such audits.

“DPOB leadership has always prioritized effective management of the organization, and the Mayor’s Office is confident that they will make any adjustments that are necessary as a result of this audit to continue their critical work for years to come,” a spokesperson said in an email.

The spokesperson added that the Mayor’s Office of Recovery Programs is currently preparing to make required comments on the audit in an official letter.

City Council member Zac Blanchard, who represents downtown and serves on the DMA board, said he’s not aware of any financial management concerns and said he would look at the audit if he has time. He added that the audit predates his time on the board and on the Council, and that a recent change to DPOB’s finance personnel could have been related.

Prior audits not obtainable

Prior audits of DPOB aren’t publicly available since they didn’t exceed the $750,000 federal funding threshold. Asked to provide DPOB’s audit for fiscal year 2023, Tucker said they are not distributed externally. He added that the 2023 audit can’t be obtained via a public information act request because DPOB is a nonprofit organization.

Harris said an organization doesn’t have to provide audits below the threshold for a single audit unless a requiring agency requests them.

The “ultimate goal,” Harris said, is to “make sure that these funds are getting into the hands of the individuals and the constituents that are really able to fulfill the mission of the organization.”

Have a news tip? Contact Brooke Conrad at [email protected] or 443-578-2126, or contact the Spotlight team at [email protected] or 410-467-4670. Spotlight on Maryland is a joint venture by The Baltimore Sun, FOX45 News and WJLA in Washington, D.C.