Minneapolis schools uncover $3 million health-care fund diversion amid audit findings

Minneapolis Public Schools reported that nearly $3 million intended for employee medical expenses was misappropriated, prompting a police report of suspected wire fraud filed on Jan. 5. A newly released, partially unredacted audit, sourced by the Minnesota Reformer, identified chief accountant Aaron Gilbert as the sole decision-maker who withheld the money with “intent to deceive,” while two other senior finance officials also provided conflicting accounts.

The district has faced a series of financial setbacks, including more than $5 million in IRS penalties for late filings and misreporting, and auditors have warned since at least 2015 about inadequate internal controls. Superintendent Lisa Sayles-Adams ended a covert “5 % defer” scheme in September 2025 that had been siphoning contributions from the employee health-care trust. In response, MPS contracted the Center for Effective School Operations, paying roughly $70,000 monthly, to manage its finance office while it works to balance the 2026-27 budget without tapping cash reserves. Critics say the district’s governance failures have led to repeated staffing cuts and a projected $50.5 million deficit for fiscal 2027.