Minneapolis Public Schools (MPS) is dealing with the repercussions of a fraud investigation into its finance office, which has revealed years of financial mismanagement, including multimillion-dollar deficits and budgeting errors. The investigation has highlighted a recent incident where $3 million was diverted from a bank account intended for employee medical expenses, following warnings from auditors about weak oversight in the finance department since at least 2015.
On January 5, MPS filed a police report alleging that nearly $3 million in wire fraud had occurred since November 2024. The report did not name any suspects, and it remains unclear if the district is pursuing criminal charges. MPS has initiated a separate investigation into the missing funds.
A third-party audit revealed that MPS Chief Accountant Aaron Gilbert made the decision to withhold $3 million from an employee healthcare account without proper approval, indicating potential intent to deceive. Although the audit did not find criminal wrongdoing, it identified Gilbert as a key figure in the alleged diversion scheme.
Two other financial officials at MPS are also under scrutiny, as they provided similar explanations regarding the missing funds. Former senior finance officer Ibrahima Diop claimed that he instructed Gilbert to withhold the payments to invest the money, which he stated generated approximately $50,000 for the district.
The investigation also uncovered that MPS's finance department had been withholding 5% of employee contributions to the healthcare account, a practice that continued until September 2025. The IRS has imposed over $5 million in tax penalties on MPS for various compliance issues since 2022.
The district's financial challenges have been compounded by declining enrollment and a projected budget deficit of $50.5 million for fiscal 2027. MPS has announced plans to cut staffing levels while attempting to balance its budget. The district's leadership has acknowledged the need for improved financial oversight and is working on strategies to address these issues.