State Sen. Jeff Hayden abruptly quit the Community Action of Minneapolis board Tuesday, demanding that the embattled nonprofit's longtime leader also resign.
It was another day of growing turmoil for an organization that has been under fire after a state audit concluded that Bill Davis, who has been chief executive of the group that serves low-income Minneapolis for more than two decades, misspent more than $800,000 in taxpayer dollars.
Hayden, DFL-Minneapolis, called the audit's findings an "inexcusable misuse of public funds" by Davis. "If these findings are shown to be true, Mr. Davis should resign."
Hayden and other Community Action board members are facing intense questions themselves for failing to oversee the spending of the organization. Some of them may also have benefited from the hundreds of thousands of dollars the audit said was spent on numerous trips, a celebrity cruise, spas, golf and other expenses.
Republicans have called a Wednesday news conference to announce an ethics complaint against Hayden for "using his elected office for personal gain," but he denied any improprieties.
Hayden said he and his wife, who served as his alternate on the board, attended the organization's retreat at Arrowwood Resort in Alexandria, but that he paid his own way.
"To be clear, neither Terri nor I accepted compensation for any cruises, spas, vacations to the Bahamas, or any inappropriate, non-board activities," Hayden said.
Republicans say they were surprised by the pattern of financial abuse outlined in the audit, first reported in the Star Tribune.
"I have looked at the report and it's pretty shocking. It's a blatant example of complete lack of oversight by the board," said Senate Minority Leader David Hann, R-Eden Prairie. "We have determined at this point that this is an issue that needs to be brought before our ethics committee."
In addition to the Senate ethics complaint, Minneapolis public schools officials say Hayden and Sen. Bobby Joe Champion, a Democrat, threatened to withhold state aid if the district did not award a contract to a North Side community organization, Community Standards Initiative.
Hayden and Champion insist they never threatened school officials.
Minneapolis City Council President Barbara Johnson said the city is going to hire an outside auditor to review the contracts that the city gave Community Action to determine if money was spent correctly.
She said the city is also working to ensure that Minneapolis residents who need heating assistance and career counseling from Community Action continue to be served regardless of who is at the helm of the organization.
Davis has not returned numerous phone calls seeking comment and did not supply the Star Tribune with the 112 page response he said his organization sent Department of Human Services auditors.
Hayden is the second high-profile politician to leave the organization in as many days. Democratic U.S. Rep. Keith Ellison stepped down from the board Monday after reviewing the audit.
The board held an emergency meeting Tuesday. Only six of the 11 board members were present at the meeting, including Fay Harrison, Ellison's alternate, and Natalie Johnson Lee, Council Member Blong Yang's alternate. The Star Tribune was not allowed to attend the meeting.
Neither Terri nor Jeff Hayden were present. The outcome of the meeting was not immediately known.
Before the meeting, Community Action released a statement on its Facebook page saying news reports show only "one perspective and contain inaccuracies."
The group said it is in the process of working to clarify items that have been questioned, and making adjustments where needed to strengthen the organization and move forward.
"We remain confident in our ability to provide high-quality services to our low-income customers, and stay committed to our important work of empowering low-income Minneapolis residents and creating change in our community," the statement said.
Though much scrutiny has been aimed at Davis in recent days, the DHS audit placed much of its blame on the board. It repeatedly points to the board's lack of oversight, which DHS said contributing to "a culture of excessive spending."
By federal law, community action boards across the country are required to be equally made up of private-sector members, low-income people and local elected officials.
Ellison, Hayden, Johnson and City Council Member Robert Lilligren were on the board during the time covered by the audit. All have said they appointed alternates and did not regularly attend meetings.
Jon Pratt, the executive director of the Minnesota Council of Nonprofits, said it's hard to know who on the board should be held responsible when it's unclear who exactly was on the board.
For example, for its 2012 tax filings, the organization listed Ellison's alternate Fay Harrison as a board member. But in 2011, Ellison's name appears.
"If it's hard to tell from looking at the list it's going to be hard to tell for the actual people on the board who is responsible," Pratt said. "They need to get clear who is actually on the board. Those board members have a fiduciary responsibility over the organization's finances."
The alleged misspending at Community Action of Minneapolis has put the spotlight on the other 25 community action programs across the state.
The head of Minnesota Community Action Partnership, an organization comprised of all community action groups, called what has happened in Minneapolis a "tragic scandal" for a "unique and isolated organization."
"[The community action agencies] are very proud of their results for low-income Minnesotans," said Arnie Anderson, executive director, Minnesota Community Action Partnership. "They are very proud of their hard-earned reputations for being trusted stewards of public funds."