New records reveal another Minneapolis Public Schools’ accounting error — $4.1M

Minneapolis Public Schools lost out on $4.1 million in state and federal special education aid during the 2025-26 school year due to a district accounting mistake, raising questions about the district’s beleaguered finance office, which has been understaffed and working with outdated technology for years. 

The district has not previously disclosed the foul-up, which involved MPS underreporting its special education expenses and subsequently losing out on state and federal reimbursement. The school board was told about the mishap in January. In May, district officials touted new procedures to increase state and federal special education aid by properly accounting for expenses, without mentioning the lost $4.1 million. 

The Reformer uncovered the error through a public records request. The lost funding is roughly enough to pay 35 teachers for a school year. 

The accounting error is the third multi-million dollar blunder reported by the Reformer since the abrupt departure of the district’s three top finance leaders in January. Finance department employees — including former Controller Aaron Gilbert — improperly withheld over $3 million from a healthcare trust account, before being ordered to replace the funds. The district also failed to properly file certain federal tax forms, which resulted in fines of over $5.3 million being assessed to the school district starting in 2023.

The district has suffered a collapse in enrollment in the past quarter century — and, thus, state and local funding tied to student population  — and is plagued by half-empty school buildings, rising labor costs and a student population with unique challenges. These factors have created a deteriorating fiscal environment.

The district also shared that officials are aware of at least two other previously unreported instances of missed funding. The first involves incorrect allocation of special education teacher salaries during the 2024-25 school year, and, according to the district’s email, “likely in years prior.”

The second involves transportation costs for homeless and highly mobile students during the 2022-23 school year, which were coded incorrectly. The district says it “missed out on reimbursement from the state” for these expenses.

The district did not respond to a request for information about the magnitude of these additional errors.

The Minnesota Department of Education has not responded to a request for an interview or comment about the agency’s role in financial oversight of the district.

The Minneapolis Federation of Educators, the union representing district teachers and paraprofessionals, said in a statement that they are “heartened to see much of this coming to light in recent months. We expect to continue to see work being done by Minneapolis Public Schools’ Senior Executive Officer Ryan Strack to root out all problems with MPS’s finance functions.”

The error could have been even worse. The Minnesota Department of Education notified the district it had underreported its special education expenses by at least $25 million in November last year, according to district emails. The underreporting was so significant that the district would have violated a federal regulation known as maintenance of effort, which prevents school districts from reducing special education spending over time — with limited exceptions — to protect the rights of these students.  

If the district had violated maintenance of effort, it would have lost out on reimbursements for the underreported expenses, but also lost an additional $8.9 million in general education funding.

The district missed a Dec. 1 deadline to correct the errors. The Minnesota Department of Education’s Chief Operating Officer Patty Hand emailed district MPS Superintendent Lisa Sayles-Adams on Dec. 3  to notify her of the underreporting and the need to submit a formal request to receive an extension past the deadline. 

The state granted an extension until Dec. 15.

Despite the extension, the district still underreported its special education expenses by nearly $5 million. The district lost $4 million in state funding and $140,000 in federal funding because of these errors, according to an email sent to Sayles-Adams by Hand on Dec. 16, 2025.

Emails between district employees in the finance department and the district’s senior leadership — including Sayles-Adams and senior district leaders — indicated that current finance department staff did not know how to properly report special education expenses to the state. 

According to one email, the two finance department employees who understood the reporting requirements left the district — and none of the remaining staff were trained to take over the reporting. The process requires a significant amount of manual work by finance department employees because district information technology systems don’t align with state reporting requirements.

The district received a report by Sepler & Associates a year ago citing high staff turnover, a lack of documented procedures, a lack of training for new employees and an outdated IT system as factors in finance department missteps. 

A year of chaos and dysfunction inside the finance department of Minneapolis Public Schools

The district also failed to complete its annual financial audit on time. State law requires school boards to approve the audit by the end of the year. Instead, the board approved the fiscal year 2025 audit in mid-April. The audit included a number of adverse findings, including a failure to properly segregate accounting duties so a person sending out checks isn’t the same as the person approving them, for instance. 

The district has hired two sets of outside investigators, a forensic accountant, a culture consultant and a financial operations consultant to handle the issues in its finance department. Public records show the district could end up spending more than $1 million on these services.

Since January, the district has relied on a consulting firm, the Center for Effective School Operations, to staff key roles within the finance department. The school board authorized the district to spend up to $830,000 with CESO for these services. 

The board has also authorized spending up to $140,000 to pay CESO to support its human resources and transportation departments.

CESO is part of Colorfuel, whose chief relations officer is Stephanie Burrage. Burrage previously served as deputy education commissioner and chief inclusion officer under Gov. Tim Walz.

In the publicly released version of its report, which was presented to the board Tuesday, CESO graded the district’s finance overall function as a 2.17 out of 4. The report describes this grade as “low efficiency, effective.” Three areas of the finance department received scores below 2, which the report describes as “low efficiency, ineffective.” Those three areas are accounts receivable and cash handling, financial systems, and payroll and benefits.

In September, the superintendent is set to unveil a “transformation” plan that is likely to involve closing or consolidating schools. The school Board first began discussing such a plan in 2023, but neither the board nor superintendent have been quick to act given the likely political fallout from school closures.