Baltimore’s backlogged payment system routinely leaves nonprofits waiting more than a year for their contracts to be approved, often leaving partners to perform important services well before they can begin billing the city, according to a report released Wednesday by the Abell Foundation.
Of 115 federal housing grants administered by Baltimore City and analyzed in the report, only one was approved on or before the date that the organization was scheduled to begin services. These delays have often forced organizations to make cutbacks, dip into reserves or rely on lines of credit, requirements that disproportionately harm small organizations, according to the report. In one highlighted case, the director of a small nonprofit sacrificed their own salary payments for nearly a year to ensure other employees could get paid and services could continue.
A combination of staffing limitations, pandemic-related delays, inflexibility in the contracting process and inefficient and inconsistent internal routines bog down the process before the city can approve a contract, the report found, resulting in “fewer and more strained partnerships.”
Baltimore relies on a network of local nonprofits to perform a wide variety of social services, from homelessness support to housing assistance to food banks to youth mentorship, work that’s often focused on the city’s low-income and Black communities. But when inefficient city systems prevent those service providers from getting promised funds, “it is more than a breakdown in business operations,” wrote Brendan Hellweg and Jake Mills, researchers at Harvard Kennedy School and the authors of the report. “It prevents government from supporting its most vulnerable and historically disenfranchised citizens.”
Hellweg and Mills’ report highlighted delays in the city’s administration of federal housing grants, known as Community Development Block Grants, or CDBG.
According to an an analysis of Board of Estimates data between May of 2021 and July of this year, the median CDBG recipient in Baltimore waited for 438 days, or more than 14 months, from the date their contract was supposed to begin to its actual approval at the Board of Estimates. Even contracts among the fastest quarter of those processed could take as long as 11 months from the contract’s start date to actual approval, while those in the slowest quarter took at least 525 days to process.
The report found that these delays created “significant” financial burdens for the city’s nonprofit partners, with most of the organizations interviewed reporting that they have had to use their reserves, rely on lines of credit or turn to other alternative channels. Still others reported having to scale back expenses and make payments late. These delays, which have only been exacerbated by the pandemic, have resulted in some nonprofits choosing not to pursue funding through the city, according to the report.
Heather Iliff, the president of Maryland Nonprofits, said she has long known that these processing delays were having “severe” effects on nonprofits, but the report proves the issues are “systemic,” harming organizations big and small.
“My organization is a much larger organization, and we couldn’t go 438 days without delivering payment,” she said. “What organization can do that?”
In August, The Baltimore Banner reported that the city’s backlog of payments to nonprofits for housing block grants had ballooned during the pandemic, leaving many organizations to wait between 18 months and two years before receiving promised funds. Iliff’s organization and the Community Development Network of Maryland sent a letter to Mayor Brandon Scott in May pushing for the city to take urgent action to resolve the bottleneck of housing grants. Maryland Nonprofits, which supports other nonprofit groups, has yet to receive a response to that letter, Iliff said Wednesday, and the organization still feels urgent action is needed to push grant payments through the bottleneck to nonprofits.
“I am hoping that this report serves as a wake up call for Mayor Scott and his administration,” Iliff said. Among the solutions Maryland Nonprofits has suggested is outsourcing grant processing to the third party Baltimore Civic Fund, a step already being taken to administer some federal COVID-19 aid, and which Iliff believes would bypass many city obstacles.
In a statement, Scott said his administration is scheduled to meet with the report’s authors to discuss how the city can resolve its payment delays to nonprofits.
“These organizations support our residents in ways that local government cannot,” the mayor said. Though issues paying nonprofits are longstanding and have been made worse by the pandemic, Scott said his administration is “actively working to improve these processes to increase government transparency and ensure that our partners have the resources needed to carry out their critical work.”
The city is already transitioning third party payments into the comptroller’s office, and streamlining processes in the housing department to cut CDBG approval timelines back to three months, Scott said.
Baltimore Housing Commissioner Alice Kennedy, whose department administers CDBG payments, told the report’s authors that the pandemic in particular has strained the agency’s capacity to process grants, but added that there will always be a gap between when a nonprofit spends money and when the city pays them back.
“Organizations must assess whether they have the organizational and financial capacity to receive funding that comes with many strings attached and is not able to be immediately available,” she told Hellweg and Mills.
Many federal grants like CDBG are processed through the city and paid out to local organizations as a reimbursement, meaning the groups spend before they actually receive their awarded funds. But processing delays mean that nonprofits are often expected to begin work before they even have a contract in place, the report states.
Claudia Randall, executive director of the Community Development Network of Maryland, said she understands that the city is managing staffing shortages and tech challenges that make processing these grants difficult. But she added that the payment backlogs have “all sorts of consequences” for the important services that local nonprofits provide.
“There’s always this narrative about how nonprofits aren’t doing what they’re supposed to do,” she said. But “here’s an instance where if you did all the right things, and you’re still not getting paid.”
Questions about the impacts of this year’s charter amendment to move a city payments to third party partners from the finance department into the comptroller’s office prompted the Abell Foundation study, but Hellweg and Mills found that both nonprofits and the comptroller staff predicted that this change would have only “minimally” impact the payment delays.
“A late invoice may be 45 days late,” said Hellweg, who previously spent three years working in the Baltimore mayor’s office under Scott and mayors Jack Young and Catherine Pugh, in an interview. But the delays prior to reaching the Board of Estimates can often stretch more than 500 days, he noted.
Among the recommendations outlined in the report, Hellweg and Mills suggest that the city allows for a partial payment to go out to nonprofits at the service start date; dedicates a team to identifying bottlenecks; and encourages nonprofits to begin charging payments from the first day they begin services, rather than waiting months for contract approval.
The report also recommends establishing multiyear contracts, a process that Celeste Amato, chief of staff to Comptroller Bill Henry, said could be beneficial in some cases but exacerbate issues of access in others.
Amato said the comptroller’s office has prioritized the city’s payment delays to nonprofits and has been working with agencies to identify places to shore up the process. Even so, some delays are outside of the city’s hands, particularly when it comes to grants passed down from the federal government. If the city could be more upfront with nonprofits about the reality of delays, Amato said “some of this stuff would not be as painful.”
“Maybe it could be faster,” she said, but at least then groups would “understand where it’s getting hung up.”