The Utah Auditor’s Office has revealed a significant misuse of public funds involving a nonprofit organization, Impact Utah, which allegedly misappropriated up to $2.8 million. According to a report released on October 17, 2023, the funds were diverted due to a lack of adequate oversight from state agencies, impacting the integrity of public resources.
The auditor’s “Limited Review” detailed how the former president of Impact Utah redirected state and federal funds from the Manufacturing Extension Partnership (MEP) program for personal expenses. The report did not disclose the former president’s name, and no criminal charges have been filed as of now.
Following the investigation, initiated after a complaint was lodged through the State Auditor hotline, the executive director of Impact Utah has resigned. The organization will cease operations on July 31, 2024, as it grapples with the fallout from the audit.
Understanding MEP Funds
Since 2020, state MEP funding has been appropriated by the Utah Legislature to complement federal MEP grants. These funds are typically managed through the Governor’s Office of Economic Opportunity and largely distributed to the Utah Industry Resource Alliance. This alliance includes the University of Utah, Utah State University, and Impact Utah, receiving approximately $2.8 million annually to provide training and support to local manufacturers.
The audit revealed that both the Governor’s Office and Utah State University failed to adequately monitor Impact Utah’s operations in accordance with state regulations. Tina Cannon, the Utah State Auditor, emphasized the critical need for accountability, stating, “Lack of clear accountability and oversight in the distribution of public funds creates a serious vulnerability.”
In a statement responding to the report, the Governor’s Office of Economic Opportunity affirmed its commitment to preventing fraud and misuse of taxpayer dollars. “We join with Utah State University, a trusted partner, in expressing disappointment about how an officer of Impact Utah allegedly misused grant funds,” the office stated. They are currently reviewing their processes to enhance transparency and accountability.
Details of Financial Misuse
The auditor’s review uncovered that between $1.8 million and $2.8 million in MEP funding was improperly spent from 2022 through the end of 2024. A substantial portion, over $2.1 million, was transferred to Vereo Impact, Inc., a for-profit entity where the former president held a majority share. The report indicated that these two entities were improperly treated as branches of the same organization.
Specific financial misconduct included the transfer of $400,000 to purchase another business, $100,000 for Vereo’s debt, $50,000 for operating expenses, and $26,000 for asset purchases. Additionally, the former president’s salary was inflated to nearly $519,000 annually, surpassing the average compensation for similar nonprofit leaders. Personal expenditures included over $35,000 on vacations to destinations such as Las Vegas, Hawaii, and Florida, along with expenses for services that lacked a legitimate business purpose.
Furthermore, the report identified nearly $10,000 in political donations made by Impact Utah to various campaigns, which is prohibited for organizations classified as 501(c)(3) by the IRS.
In a statement to the media, Impact Utah’s leadership expressed regret for the financial mismanagement under previous leadership. “We wish to express our deep regret and sincere apology for the shortcomings in financial management that occurred under former leadership,” the organization stated. They acknowledged that the findings of the audit highlighted failures in transparency and accountability.
Future Oversight and Compliance Measures
In light of the findings, the auditor’s report recommended that both the Governor’s Office of Economic Opportunity and Utah State University establish professional oversight standards to ensure compliance with state grant regulations. The Governor’s Office was urged to implement enhanced monitoring requirements for MEP project recipients, including those such as Utah State University.
Both the Governor’s Office and Utah State University accepted the auditor’s recommendations, acknowledging that existing contracts and documentation may have hindered their oversight capabilities. Utah State University expressed its commitment to recovering the misappropriated funds and indicated immediate changes to ensure that all state-approved funds are subjected to their standard internal monitoring processes.
As part of the audit process, the University of Utah, which oversees federal MEP funds, maintained communication with the National Institute of Standards and Technology throughout the investigation. They issued a “Stop-Work order” to Impact Utah on March 26, 2023, in accordance with federal guidance. Following the review, the university’s MEP center received top marks for financial reporting.
Impact Utah’s leadership stated that the decision to cease operations is intended to protect the integrity of the state’s MEP program and assured clients that existing engagements will be honored without disruption.
The Utah Manufacturers Association, a non-voting member of the Utah-MEP Alliance, clarified that it does not have direct oversight of Impact Utah’s financial operations, emphasizing the need for comprehensive reform in light of these serious allegations.
