The staff of a nonprofit promoting alternative transportation in Minneapolis overbilled a federal grant and destroyed hundreds of documents when the city began investigating, a city auditor said Tuesday.

Dan MacLaughlin, the executive director of Move Minneapolis since 2010, was placed on leave by the group’s board after the findings this week from the city’s audit department. Auditors also found evidence MacLaughlin’s work computer was used to view pornography and make pirated copies of movies.

Move Minneapolis, created by the city in the early 1990s and formerly known as Commuter Connection, is best known for promoting transit, bicycling and carpooling at its new headquarters on 5th Street and Nicollet Mall. It has four full-time employees.

The organization is largely funded through a federal grant exceeding $300,000 a year, which reimburses 80 percent of their eligible expenses. Auditors found Move Minneapolis had overcharged the grant by more than $50,000 between 2012 and 2015, resulting in more than $37,000 in extra reimbursements.

“They were making money off the grant in some of these situations,” the city’s internal auditor, Will Tetsell, told the city’s audit committee Tuesday.

MacLaughlin declined to comment on the audit when reached by phone Tuesday. The organization’s most recent tax filing showed he earned $68,900 in 2014.

Suspicions about conduct at Move Minneapolis arose in 2014 when an employee resigned and made a number of allegations to the board and a key city official. The city initially hired an outside accounting firm to conduct a review, then embarked on a more in-depth probe after receiving its findings.

The overcharges occurred when Move Minneapolis received discounts from vendors, but billed the grant for the full amount, Tetsell said. The difference was used to cover the grant’s 20 percent local match requirement.

The $50,000 overcharged total did not include an additional $43,856 that was given as “profit-sharing” bonuses for employees that auditors said may not have been reimbursable.

The audit said the totals were not exhaustive, so the precise overbilled amount could be larger.

Auditors also found that in the days before they received MacLaughlin’s laptop computer for analysis, someone had used sophisticated software to delete 1,179 files from the hard drive.

“All that potential evidence is gone,” Tetsell said. “It’s missing and there’s no way to get it back.”

MacLaughlin initially denied using the program in interviews with auditors, but later admitted to deleting files that were personal and embarrassing rather than those related to Move Minneapolis business, the audit said.

A forensics investigation found the computer contained “non-work related pictures and files consisting of unclothed females, movies, and music” and deleted Internet history related to a pornographic website. MacLaughlin said he sometimes rented films from Video Universe and copied them onto the hard drive. Yet many of those copied blockbuster films, from “Jurassic World” to “Terminator,” remained on the hard drive.

“Not deleting the movies and music Mr. MacLaughlin claimed he did not want us to see leaves questions about what files were deleted,” forensic specialist Scott Stillman wrote to auditors.

Other audit findings were that Move Minneapolis backdated invoices to prior grant periods and that the organization did not follow federal third-party contracting rules.

Tina Hoye, chair of the Move Minneapolis board, said the board is reviewing the findings.

“While we are deeply concerned that the audit committee found that [Move Minneapolis] is not in full compliance with all of the requirements of our Congestion Mitigation and Air Quality (CMAQ) grant, we are reassured that funds from the grant were spent in ways that support our mission,” Hoye said in an e-mail.

Move Minneapolis’ federal grant funds are routed from the Met Council through City Hall, giving the city some oversight over its operations. Several city representatives sit on the organization’s board, but audit committee chair Linea Palmisano suggested Tuesday that the city should dissolve its relationship with Move Minneapolis.

The audit is the most high-profile probe by the city’s recently revamped internal audit department.

“I hope this serves as a notice to all of our city partners … if you do business with the city, make sure your house is in order,” Palmisano said. “We intend to continue investigating these kinds of organizations to ensure professional practices.”


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