It is unclear whether the district is still pursuing criminal charges, though the school system confirmed that all of its wire transfers during that time appeared to be for legitimate reasons. Since then, MPS has commissioned a separate but seemingly related investigation into the mysterious disappearance of $3 million in earmarked employee healthcare funds.

Newly unredacted portions of a third-party audit, obtained by the Minnesota Reformer, concluded that MPS Chief Accountant Aaron Gilbert made the sole decision to withhold a total of $3 million from an employee healthcare account over a 10-month period and that she had the “intent to deceive.”

Greene Espel, the law firm that MPS hired to investigate why $3 million gradually went missing from the school system’s health insurance trust, determined that Gilbert decided on her own to divert the funds without first obtaining written approval. “In sum, the evidence points to Ms. Gilbert as the decisionmaker,” the report reads.

Though it flagged no criminal wrongdoing, the external review pinpointed Gilbert, who left MPS in May with an open complaint against her, as the most likely culprit behind the alleged diversion scheme.

The responsible party was unclear, as two other top financial officials at MPS were also suspected of involvement in the scandal. Both of them reportedly provided similar answers — to investigators and members of the media — as to where the money was spent, indicating that Gilbert did not act alone.

Former senior finance officer Ibrahima Diop previously told the Minnesota Star Tribune that it was actually his call to withhold those payments and instead invest the $3 million, a move he said earned the cash-strapped district roughly $50,000. “Interest rates are rising, and now it makes sense to increase our investment position,” Diop recalled telling Gilbert.

A heavily redacted version of Greene Espel’s investigative report initially only named Tariro Chapinduka, the school district’s ex-executive director of finance, saying that he and other individuals, whose identities were blacked out, similarly insisted they were attempting to generate better financial returns for MPS by investing the funds.

The report mentioned that the individuals offered other conflicting explanations for withholding the funds, such as claiming the amount served as an administrative fee, which were “inconsistent with the facts and contrary to the law governing trusts.”

“Justifications … changed over time, and the Investigators do not find any of them particularly credible,” the auditors wrote.

When asked why his reasoning for withholding the money might have shifted, Chapinduka told Sahan Journal, a nonprofit newsroom covering immigrants and minority communities in Minnesota, “I was trying to figure it out, just like everybody else.”

Chapinduka, an immigrant from Zimbabwe who said he was fired because he refused to resign, questioned whether the district’s handling of the case stemmed from panic related to Minnesota’s Somali-tied fraud crisis.

“I’m an immigrant, so when these things are going around, people start to just make their own assumptions,” he said. “I am trying to make sense of it, and it just didn’t make sense for someone who just had started.”

While he was not with the district when the withholding decision was made, Chapinduka was employed by MPS when the school system created the healthcare account and started self-insuring in 2017, before he went to work elsewhere and returned to Minneapolis in July 2025.

Investigators say MPS’s financial department started quietly shorting the school district’s healthcare account by holding back 5% of regular monthly employee and employer contributions, and in November 2024, continued to do so until Superintendent Lisa Sayles-Adams stopped the practice in September 2025. An email exchange included in the investigative report cited financial officers routinely subtracting 5% from each month’s transfer, labeling the reduction as “5% defer” in their communications.

The trust fund was later made whole. However, when the district’s finance office eventually transferred the full amount of withheld funds, plus interest, to the retiree account 10 months after the unusual deferments began, Gilbert allegedly directed a string of additional financial transactions involving the district’s investment account and some of its bond proceeds. Rather than simply wiring the money back, Gilbert’s complex transactions were never explained to investigators and did not appear to be necessary.

“This series of transactions suggests that Ms. Gilbert had an intent to deceive,” the audit report says.

The account designated to pay staff’s healthcare claims is supposed to be walled off to prevent raiding for unrelated uses. A forensic accountant could only deduce that the withheld funds did not leave the district through wire transfers, but that does not rule out the possibility that the money may have been rerouted out of MPS’s accounts by other means.

School district’s finance office remains in disarray

The new findings of financial impropriety follow the Internal Revenue Service levying millions of dollars in fines against MPS for late tax filings and misreporting.

Since 2022, the school district has incurred more than $5 million in tax penalties assessed for a wide range of compliance issues, including $2.9 million stemming from errors in calculating and reporting employment taxes and another $2.3 million for failing to file W-2 and 1095-C forms on time.

In total, the value of the fines equals 40 teacher salaries, based on the average annual staff salary at MPS.

The investigative report about the healthcare account referenced the IRS infractions. Investigators had asked multiple individuals about the violations, “But no one was able to explain what caused these tax penalties.” Accordingly, the auditors recommended that the district consult with tax specialists to gain institutional knowledge about tax law.

In the report, investigators mentioned that the health insurance trust — called a voluntary employee benefit association in the tax code — was never formally registered with the IRS when the school district created it in 2017. The tax-exempt trust’s assets grow tax-free. Retroactive registration is possible, but the withholding of contributions could complicate matters.

FAIRFAX COUNTY PUBLIC SCHOOLS BUCKLES AMID SCANDALS, FURIOUS PARENTS, AND BUDGETING CRUNCH

For more than a decade, independent auditors who have assessed MPS, the state’s third-largest school district, for noticeable vulnerabilities pointed to insufficient internal controls necessary to supervise an organization of its size.

The district’s external watchdogs warned multiple school administrations over the years about deficient oversight of its accounting department, given the office’s current structure, reduced headcount due to chronic budget cuts, and the lack of segregated duties among the few remaining staff.

Dividing up duties, instead of blending them as MPS’s finance department has been doing, is an integral safeguard against fraud, helping keep staff in check and preventing general bookkeeping errors.

In an April update to the community, MPS announced it was able to secure approximately $10.7 million in state revenue for the 2025-26 school year and an additional $10.8 million the following academic year by correcting a longtime error in the coding of certain expenditures.

The coding error likely cost the district tens of millions of dollars in revenue dating back to 2022-23, school officials said, and involved a billing issue that miscategorized special education expenses.

This coming school year, MPS is eliminating hundreds of support staff, including school counselors, social workers, and librarians, primarily in district schools that serve students in the greatest need of extra support. The cuts are somewhat of a trade-off, as MPS is simultaneously increasing its number of elementary teachers in order to meet class-size caps negotiated with the local teachers union.

Both are a result of the school board adopting a budget in June that will include $39 million in cuts for the upcoming academic calendar, marking the third consecutive year that MPS has had to significantly slash staffing levels and school programming since pandemic-era federal aid expired. In recent years, the district has lost about 20% of its student enrollment, which state and local funding formulas directly depend on to allocate resources “per pupil.”

For fiscal 2027, MPS is facing a budget deficit of $50.5 million, a shortfall $20 million more than previously estimated in its five-year budget projection released last fall, meaning even more foreseeable student-service reductions than expected to balance next year’s budget.

The funding gap has been brought on by decades of declining enrollment, all while the century-and-a-half-old school district continues to operate out of the same volume of school buildings despite the school board finding that 52% of its facilities, many of which contain empty classrooms, are underutilized.

Beyond contracted auditors, some outside observers believe MPS’s finance operations have reached a crisis point.

“The Minneapolis school district’s financial crisis isn’t a surprise,” said Catrin Wigfall, an education policy fellow at Minnesota-based Center of the American Experiment. “Auditors flagged weak financial oversight for years, yet the district failed to act on many of those warnings.”

Wigfall, a former public school teacher, noted that MPS also approved a collective bargaining agreement that it could not afford, has neglected to clear its backlog of public records requests regarding the heavily redacted financial autopsy report, and has yet to lay out a clear timeline for fixing its problems.

“This is a governance failure,” Wigfall told the Washington Examiner. “District leaders need to fill the financial oversight positions auditors have repeatedly recommended and give the public regular and transparent financial updates.”

A spokesperson for MPS said the school district is taking critical steps to get its financial house in order.

“MPS is working on several strategies to ensure that our financial operations are functioning at the highest level, meeting all applicable standards and requirements, and providing assurance to the public that resources are being managed appropriately, efficiently, and in the best interest of our students,” the school district told the Washington Examiner.

The school system pointed to the administration’s proposed 2026-27 general fund budget, which is separate from other operating funds such as debt obligations and capital projects, being balanced without tapping its cash reserves for the first time in several years.

FAIRFAX COUNTY SCHOOLS RETAIN COPIOUS CULTURAL OBSERVANCE DAYS OUT OF ‘DIVERSITY’ CONCERNS

As for increasing “forthrightness,” MPS said that as part of its budget development process, the district has published an online transparency tool that allows community members to review “an unprecedented level of granular budget information.”

“We acknowledge that continuous improvement work and correcting long-standing processes and issues takes time, and it is our responsibility to get it right as soon as possible,” MPS said.

Following the withholding revelations, MPS has since spent heavily on outsourcing a private consultant to manage its finances, paying the Center for Effective School Operations nearly $70,000 a month to oversee the school system’s finance department. Based on the monthly cost of the contract, CESO will end up charging MPS well over half a million dollars for the firm’s advisory services over the past eight months.

CESO is part of Colorfuel, whose chief relations officer notably is Stephanie Burrage, Minnesota’s first chief equity officer appointed by Gov. Tim Walz (D-MN) to champion diversity, equity, and inclusion efforts statewide.