BALTIMORE (WBFF) — An influential nonprofit in Baltimore that receives funding from federal, state, and city government agencies is ending its fiscal management services for local charities, raising questions about how it handles taxpayer money.

Fusion Partnerships announced an end to its more than two-decade-old fiscal sponsorship program this year, potentially impacting dozens of organizations in the Baltimore area that rely on financial services. Fiscal sponsorships allow government agencies to award grants to organizations that do not have a tax-exempt status.

An audit of Fusion Partnerships issued in 2023 revealed the organization managed taxpayer dollars awarded by the federal and Maryland state governments. This included $1.4 million from federal agencies in 2022, and roughly $500,000 from Maryland state agencies from 2021 to 2022.

The audit showed Fusion handled grants for a variety of institutions, including three federal agencies, Maryland Department of Health, Maryland governor’s office, and the Baltimore City government. It is unclear if Fusion’s decision to end its fiscal sponsorships will impact the taxpayer-funded grant programs.

Brian Mittendorf is the H.P. Wolfe Chair in Accounting at Ohio State University, where he specializes in nonprofit accounting. He said stability is required for fiscal sponsorships to be successful.

“It provides some assurances having a well-vetted fiscal sponsor help with that and essentially help charities that would be eligible,” Mittendorf told Spotlight on Maryland. “The problem that you run into here is that the huge value a fiscal sponsor can bring is assurance and stability. And that seems to be what the problem was in the end is that the fiscal sponsor wasn’t able to offer that ongoing stability.”

The audit of Fusion was required because the organization received more than $1 million in federal grants. The audit was conducted by L. Abrams & Company, a Maryland-based law firm that detailed five “significant deficiencies” at Fusion, which included how the organization had inaccurate and missing financial documents.

Fusion did not respond to questions about how it plans to resolve its taxpayer-funded grant programs, instead telling Spotlight on Maryland that it is focused on ensuring its fiscally sponsored organizations are able to continue operations.

The largest grant handled by Fusion, according to the audit, was $530,796 from the U.S. Department of Health and Human Services (HHS) for “Harm Reduction Services.” The federal agency awarded the taxpayer funds to the Maryland Department of Health’s Prevention and Health Promotion Administration.

A spokesperson for the Maryland Health Department said the state agency gave the federal grant to Fusion on behalf of the Baltimore Harm Reduction Coalition (BHRC).

“Fusion operated as the fiscal sponsor for Baltimore Harm Reduction Coalition (BHRC), managing their funding, payroll, accounting, cash flow, etc. as the fiscal arm for BHRC during the grant period,” the Maryland Health Department spokesman told Spotlight on Maryland. “The grant provided harm reduction services through the non-profit BHRC who provides harm reduction services in downtown Baltimore City.”

The spokesman said the BHRC used the funds to provide clean drug paraphernalia and overdose services for drug users in 2022 — the only year of the program. BHRC provides kits for injecting, smoking, and snorting drugs, according to its website.

The Maryland Health Department gave $303,223 in state grants to Fusion from 2021 to 2022, according to the audit. The agency’s spokesman said the funds were also used for BHRC’s harm reduction services.

HHS gave another $257,426 to Fusion to manage two grants for Morgan State University, whose spokesperson told Spotlight on Maryland that “all awards are being actively wrapped up due to Fusion’s imminent closure and dissolution.”

An HHS spokeswoman told Spotlight on Maryland that the agency “does not comment on the details of its internal deliberation process related to grants to maintain the confidentiality and integrity of the process.”

The U.S. Department of Treasury gave Fusion $428,403 to handle COVID-19 relief funds for the Baltimore City government.

The U.S. Department of Justice gave Fusion $209,967 to manage a parole reentry program for the Governor’s Office of Crime and Prevention.

The Treasury Department, Justice Department, Baltimore City government, and Maryland governor’s office did not respond to questions about how the funds were used and if the programs are still active.

The Maryland State Arts Council (MSAC) gave Fusion a $55,604 grant, which a spokeswoman said was for fiscal sponsorship services that are now uncertain as the program dissolves.

“Fusion is working with grantees and MSAC to ensure that contractual obligations are fulfilled on a case-by-case basis,” the MSAC spokeswoman told Spotlight on Maryland. “Using a fiscal sponsor allows MSAC to distribute grant funds to communities where establishing nonprofits is a barrier.”

Mittendorf expressed concern about next steps when a fiscal sponsor program suddenly folds.

“Ultimately, the question is what happens if you get a grant on the basis of having a fiscal sponsor and then that fiscal sponsor goes away?” he told Spotlight on Maryland. “That, of course, would put the grant in jeopardy.”

Fusion received at least $3 million in Baltimore City taxpayer dollars since 2020, as previously reported by Spotlight on Maryland.

Despite receiving funds from the local, state, and federal government, Fusion does not list any income under the government grants section of its nonprofit tax forms dating back to 2015.

Fusion paid the IRS federal tax liens in 2021 and faced a lawsuit from its former executive director that same year who alleged financial mismanagement at the organization, as previously reported by Spotlight on Maryland. Fusion denied allegations in the lawsuit and the two parties agreed to dismiss the case in 2022.

Baltimore City has struggled to maintain its fiscal sponsors in recent years, as previously reported by Spotlight on Maryland. Strong City Baltimore similarly ended its fiscal sponsorship program in 2021. Thrive Arts collapsed in 2023 after operating for less than two years.

Spotlight on Maryland is a joint venture by FOX45 News and The Baltimore Sun. Have a news tip? Contact Patrick Hauf at pjhauf@sbgtv.com. Follow him on X @PatrickHauf.