18 grassroots organizations sued another Philly nonprofit after it lost over $400,000
The groups are seeking funds the fiscal sponsor owed them before it collapsed last year.
A collection of Philadelphia grassroots nonprofits are suing the umbrella organization that lost them hundreds of thousands of dollars from years of mismanagement and poor accounting.
The 18 small groups have sued the Federation of Neighborhood Centers, a nonprofit that helped them and other small organizations manage grants. FNC, which operated as a fiscal sponsor for more than 100 Philadelphia grassroots nonprofits, collapsed last year after it was unable to distribute money owed to the groups.
After years of poor recordkeeping and spending itself into a deficit, and in some cases using money designated for one group to pay another, the organization froze outgoing payments by the end of summer 2025 and ceased operations by the end of the year.
Each of the 18 organizations says it held a positive cash balance with FNC at the time of its collapse. The fiscal sponsor lost more than $426,000 belonging to 24 groups, a third-party audit found. The suit claims the groups had to shut down or cut back operations as a result of the nonprofit’s financial mismanagement.
» READ MORE: A Philly nonprofit lost $426,000 meant for small neighborhood organizations, an audit showed
The fiscal sponsor’s then-CEO, Michael Harbison, resigned in August 2025. He did not have relevant experience in an executive, management, or financial accounting role, and “does not know why he was hired” as CEO, according to the complaint filed last week in Common Pleas Court.
The complaint alleges the Federation of Neighborhood Centers should have known about its financial challenges by early 2024, and did not have an adequate workforce to meet the demands of administering fiscal sponsorship services for over 100 small organizations.
The current CEO, Demir Moore, acknowledged the nonprofit had grown too quickly and took on more clients than it could handle without proper financial guardrails, the complaint said. The collapse of the fiscal sponsorship program was due to a “lapse of management,” Moore previously told The Inquirer, a comment that was quoted in the lawsuit. Moore also said the downfall was “absolutely not attributable to malfeasance or embezzlement.”
Moore did not immediately respond to a request for comment, nor did the plaintiffs’ attorneys with Ballard Spahr.
As the Federation of Neighborhood Centers collapsed and froze operations, Social Impact Commons, an organization that supports fiscal sponsors, came in to conduct the financial audit. It also assisted the fiscal sponsorship program’s shutdown, including helping some grassroots organizations transition to new fiscal sponsors.
By the time it finished working with FNC in February, Social Impact Commons found 34 projects had gone to new fiscal sponsors or independent nonprofits, 39 were closed or defunct, and 31 had yet to transition. It’s unclear what has happened to those remaining projects since then, or if they have found any financial relief.
The 18 organizations suing FNC represent a wide range of missions, like improving food access, empowering underrepresented young filmmakers, supporting mothers who have lost children to violence, animal rescue, and more.
