Minnesota's legislative auditor is launching an investigation into whether the Minneapolis Urban League double-billed the state and the Minneapolis School District for education programs that received more than $1 million in taxpayer money since 2013.

Legislative Auditor James Nobles said Wednesday that allegations against the Urban League were serious enough to warrant inquiry into the organization's finances and those responsible for oversight.

The School District awarded up to $800,000 to the organization to help students struggling to get diplomas from Minneapolis high schools. Two years ago, legislators gave the organization $300,000 a year for a program initially designed to also help struggling students get a high school diploma or secure a job.

State records show the Urban League placed many of the same students in both programs and only a small fraction graduated. The state's education commissioner has said her office has no other details about the program, known as the 13th Grade, because legislators stripped all accountability provisions from the grant measure two years ago.

Nobles said he received a letter from Assistant Senate Minority Leader Michelle Benson, R-Ham Lake, urging him to audit the Urban League after reading reports on the two programs in the Star Tribune earlier this week.

"Given the gravity of the allegations, it's likely we will conduct a full investigation," Nobles said in an interview. He said his staff will conduct a preliminary review of the Urban League's finances and then assess how much more time would be needed to make recommendations.

"This preliminary review will put the League on notice about the seriousness of the allegations," he said.

Scott Gray, the Urban League's outgoing CEO, said Wednesday night that his group had no knowledge of an impending audit but that "we welcome the opportunity to be transparent and share our work and outcomes."

Gray said last week that the 13th Grade and the Urban League's Academy program are not identical. He said they retooled 13th Grade to supplement the Urban League Academy and said there is nothing in the contracts that say "that a 13th Grade kid can't participate in the Urban League Academy or vice-versa."

Benson said the investigation into the alleged double-billing is essential because of the Urban League's past use of state grants.

"When an institution like the Urban League comes down to the Capitol and requests grants, they need to be held accountable," Benson said in an interview. "And they need to hold themselves accountable to a very high standard."

She said the Urban League's credibility with legislators is in doubt, citing the group's poor performance using state grants to enroll people in the MNsure health insurance program.

Education Commissioner Brenda Cassellius said last week that the way the legislation was written gave her no authority to oversee the state's money. She and other education officials have criticized both programs, saying there is little proof that either program has been successful.

Two DFL state senators — Bobby Joe Champion and Jeff Hayden — were the main backers of the 13th Grade legislation and are now trying to raise funding for the program to $1.8 million over the next two years. Both are at the center of a legislative ethics investigation for their involvement with a Minneapolis education group called Community Standards Initiative, which had ties to Hayden's father.

Hayden's father, Peter Hayden, also served on the board of the Urban League at the time the organization received the state money now in question.

Both Minneapolis senators have defended the Urban League's work as essential to closing the city's achievement gap between white and minority students, which is among the worst in the country.

Nobles is currently investigating another organization with ties to Hayden. Hayden served as a board member of Community Action of Minneapolis (CAM), a taxpayer funded nonprofit that is also at the center of an FBI and IRS inquiry that started this year. The organization shut down last September after an audit by the Minnesota Department of Human Services that said that Community Action leaders misspent at least $800,000 on lavish trips, car loans and other unallowable costs.

Hayden and his wife, Terri, traveled to New York City at the organization's expense, and they also attended retreat at a luxury resort in Alexandria, Minn. Hayden contends he did nothing wrong and did not benefit personally from CAM.

Founded in the 1920s, the Urban League is currently in a financial crisis. In 2000, it listed more than $12 million in revenue from grants, gifts and membership fees. But today its revenues have declined to $3.5 million a year, according to its latest tax filings.

Alejandra Matos • 612-673-4028

Paul McEnroe • 612-673-1745