Two Minnesota state agencies severed ties Friday with a Minneapolis nonprofit that was found to have spent lavishly on travel, bonuses and executive perks at the expense of services to low-income families.
The Departments of Commerce and Human Services took the actions after an audit showed persistent irregularities in spending by Community Action of Minneapolis. The organization's mission is to help connect people with services such as job-search assistance and home-heating aid, mostly using federal and state grants.
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"Effective immediately, we will facilitate the transition of services under the grant contracts to a successor agency. We will also take steps to recoup misspent funds," Deputy Human Services Commissioner Charles Johnson wrote in a termination letter to organization executives.
The amount the state could attempt to recoup is being determined and could range up to $800,000.
Gov. Mark Dayton, who said this week he was "alarmed" and "appalled" by the nonprofit's spending, supported the move to have the state terminate its relationship, spokesman Matt Swenson said.
Investigators and staff from both agencies showed up with subpoenas at the organization's headquarters Friday to collect financial records. The Star Tribune, which first documented the audit in a story Sunday, reported that Community Action's employees were sent home and the doors were closed by midday with a posted notice that applications for assistance programs were indefinitely halted.
A phone message left by The Associated Press with the organization's executive director, Bill Davis, wasn't immediately returned.
The audit finalized in early September detailed tens of thousands of dollars spent on catering and out-of-state travel by Davis, including a Bahamas trip. Davis' salary exceeding $250,000, bonuses and a personal car loan made to him also raised flags.
Community Action spends millions of dollars per year providing services to hundreds of thousands of city residents.
Some well-known Democratic officials have been board members — though they appointed proxies — and have since stepped down. One of them, state Sen. Jeffrey Hayden, is now the subject of a Republican-filed ethics complaint; he denies wrongdoing.
State officials urged people to contact other groups playing similar roles to fulfill energy assistance or home weatherization needs.
"Our first priority must be to ensure that low-income people in Minneapolis and other parts of Hennepin County are getting the help they need," said Human Services Commissioner Lucinda Jesson.
One of the groups that could pick up the slack is the Community Action Partnership of Suburban Hennepin County.
Republican gubernatorial nominee Jeff Johnson, a county official, is a board member of that group but has a designee serve on his behalf. He criticized Dayton and his administration for acting too slowly to fix deep-rooted problems.
"If he and his DHS commissioner were competent and aware of what's happening, they would have discovered these issues long ago, without a tip from a whistleblower," Johnson said in a written statement.
Dayton campaign spokesman Jeremy Drucker responded: "Commissioner Johnson doesn't seem to understand that it was the Minnesota Department of Human Services' audit which uncovered this alleged wrongdoing. Community Action of Minneapolis is governed by a board, which does not have any state agency members."