Met Council audit finds ‘high risk’ that nonprofit misused federal funds

A Metropolitan Council audit spurred by the resignation of Minneapolis Regional Chamber CEO Jonathan Weinhagen found a “high risk” that a chamber subsidiary misused federal grants to promote transit, biking and walking.

The audit found a litany of financial problems at Move Minneapolis, a nonprofit subsidiary of the chamber that offers commuter resources. They include “a pervasive lack of documentation, complex and opaque financial relationships, fungibility, and evidence of fraudulent practices.”

The audit report, which also found problems with Met Council processes, raises questions about whether federal funds granted to Move Minneapolis were caught up in alleged embezzlement by Weinhagen.

The “financial relationship between the many entities within the chamber led to intermingling of funds, and inadequate documentation of expenditures led us to be unable to verify all the expenses,” Met Council Auditor Sydney Kloster told the regional governing body’s Audit Committee on Tuesday.

Weinhagen appeared in federal court in October, indicted on five counts of fraud. The charges allege he embezzled more than $200,000 by contracting with a fictitious consulting company he created using an alias. He allegedly stole money the chamber donated as a reward for information in 2021 shootings that killed three young children in Minneapolis within weeks.

Weinhagen has yet to enter a plea. An arraignment set for last week was pushed back.

In a written response to the audit dated Oct. 31, Move Minneapolis Executive Director Tiffany Orth and Chamber CEO Mike Logan acknowledged the seriousness of the findings. They said an internal investigation preceding Weinhagen’s resignation found no “diversion of funds” from Move Minneapolis, and outlined steps the organizations are taking to strengthen financial controls.

The audit also found the Met Council’s process for awarding federal grants for promoting transit lacks competition and that, in administering them, it lacks sufficient oversight.

“Recognizing that weak controls in this situation lead to tangible losses reinforces why basic oversight controls are not only important for compliance but help mitigate risk,” the report said.

Auditors recommended that the Met Council restructure its program for managing federal funding for transit outreach groups, including better oversight of grants and payment monitoring. Staff agreed to carry out reforms and seek repayment of any misspent funds.

At the meeting Tuesday, Associate Auditor Lakshmi Vemuri said the process used to allocate and administer the funds for these programs is unusual and “doesn’t really reflect the council’s overall grant management.”

The Met Council is withholding $480,000 from Move Minneapolis as it investigates further, and said it may end its more than three-decade relationship with the nonprofit, pending the outcome.

It’s not the first time Move Minneapolis has come under financial scrutiny — or had funds withheld.

The Met Council withheld reimbursements to Move Minneapolis for a time following a 2015 city audit, according to documents. Former CEO Dan MacLaughlin was fired in 2016 after a city of Minneapolis audit found the organization negotiated with vendors for discounts, then billed its federal grant for the full amount. The audit also found files deleted from a key computer.

Met Council auditors said the state auditor, legislative auditor and Federal Transportation Administration had been notified of the findings.

After the presentation Tuesday, committee member Scott Zaczkowski, who directs internal audits at the Metropolitan Airports Commission, asked whether auditors would look into three other organizations receiving grants through the same program and overseen by Metro Transit’s Commuter Programs division: Anoka County Commute Solutions, I-494 Corridor Commission and Move Minnesota.

Chief Audit Executive Matt LaTour said that remains an open question.