Audit finds Minnesota Academies for the Deaf and the Blind lacked financial oversight

The Minnesota Academies for the Deaf and the Blind failed on multiple fronts to provide adequate oversight over its finances while receiving tens of millions of dollars from the state over the last 2½ years, according to a report from the Office of the Legislative Auditor released Tuesday.

Both the Academy for the Deaf and the Academy for the Blind are residential public schools in Faribault that enroll 85 students and 45 students, respectively. Enrollment at both schools has ticked down since 2020. The organization encompassing both schools, called the Minnesota State Academies (MSA), received an $18 million general fund appropriation in fiscal year 2024.

The 46-page report noted concerns over a variety of topics, from staff travel to lack of monitoring of related foundations, and pointed out that the schools’ account balances have continued to grow even as enrollment has declined.

Over the last dozen years, the balance in MSA’s accounts for operations and special purposes grew more than 700% to more than $3.7 million, the report said.

Auditors wrote, “MSA staff told us they were aware of the large balances and have discussed how to better manage these appropriations; however, as of July 2024, they had not many any decisions for how to spend down these balances.”

In response, the Minnesota State Academies’ Superintendent Terry Wilding — who has held the position since 2016 — said the organization accepts all the findings and will comply with the recommendations.

“The Minnesota State Academies are committed to strengthening our internal controls and improving our documentation system to ensure we are working in accordance with state policy and the best interest of the State of Minnesota,” Wilding wrote in a letter to the auditor’s office.

Among the dozen issues of “noncompliance and internal control weaknesses” cited in the report:

Both MSA schools have foundations to support their missions, though the report found that MSA “did not obtain required financial reports from its affiliated foundations, including their annual financial statements or their annual reports about fundraising activities.”

The Minnesota State Academy for the Deaf Foundation was inactive between 2020 and 2023 because the foundation board members had moved out-of-state, according to the report. And the Minnesota State Academy for the Blind Foundation did not file as a nonprofit corporation with the Office of the Secretary of State until the auditor’s office inquired about a filing status in May.

In his letter, Wilding said that, by next month, a school administrator for each school will be assigned to act as a liaison between each school and its foundation. But, he added, “The [Minnesota State Academy for the Blind Foundation] is considering its future and may not continue their operations. If this is the case, we will obtain financial documentation of their fund disbursements for record keeping.”

Over the last several months, Wilding wrote, MSA has updated or implemented new procedures to address several concerns, including how payroll and deposits are monitored and how both petty cash expenses and travel expenditures are approved.

A quarterly review of donation acceptance forms will begin in 2025, he said. MSA’s fiscal services director will also work with the state Department of Education “on the process for returning overreported expenditures” — a process Wilding wrote should be completed by January 2025.