A recently released report showed that Minneapolis Public Schools incurred $5.3 million in IRS penalties since 2022. $770,500 in fees has already been paid to the federal government, and the district is seeking to reduce further charges.
The report is the latest piece of a cascade of poor financial news for the district, currently facing a $75 million budget deficit for the 25-26 school year and a projected $50 million deficit for the 26-27 school year.
The Minnesota Reformer wrote regarding the district’s IRS penalties that “The penalties were assessed for a range of issues, including $2.9 million for errors calculating and reporting employment taxes and another $2.3 million for late filing of Forms W-2 and Forms 1095-C. That’s enough to pay about 40 teachers, given current district labor costs.”
The report which carried the news of the IRS penalties contained another finding: The district withheld nearly $3 million owed to an employee health care trust account for ten months beginning in 2024. The Minnesota Reformer obtained this information through a public records request for a investigative report on the withholding prepared by the Greene Espel law firm.
On the same day that they released the legally requested report to the Minnesota Reformer, the district noted on a website post that as “the trust was made whole, there was no impact to employees’ health insurance.” However, due to MPS’ opaque accounting practices, it is not known for certain why the money was withheld or what was done with it during the ten months it was not in the proper account. The district paid the Greene Espel law firm $120,000 to investigate the maneuver, and the firm found that no one present at the district was able to give a cohesive account. The district has not yet addressed the topic at any public board meeting.
The district’s finance department has been in chaos for some time, but has only recently undergone significant personnel changes. Another law firm, Sepler and Associates, was paid nearly $29,000 in May 2025 to conduct a review of the finance department climate and culture. They found significant systemic issues within the department, including dysfunction among employees and fear of retaliation. It’s likely that this report was used to justify some of the later personnel changes.
The district’s chief financial officer, Ibrahima Diop, left his annual $221,408 position on Jan. 30. He had been placed on administrative leave in early January along with two other administrative officials. Diop had previously been reprimanded twice and then placed under “escalated disciplinary action” by Superintendent Lisa Sayles-Adams. Of the two other suspended administrative officials, Executive Director of Finance Tariro Chapinduka was fired and Director of Finance-Controller Aaron Gilbert remains employed but is “out of office until further notice”.
After Diop’s departure, the district staffed its finance department with the Minneapolis-based firm Center for Excellence in School Operations (CESO). According to documents obtained by the Minnesota Reformer, the district’s contract with CESO authorizes spending over $68,000 per month on services. CESO is expected to produce a finance report in October.
Currently, the Minneapolis Public School District is on track to spend nearly $700,000 on outside investigators and temporary consultants to address its troubled finance department.
The district’s practices of dysfunction, public silence, and financial malpractice are sure to worry parents who already have concerns about the district’s dropping enrollment and poor building management practices. In 2025, only 40.8 percent of Minneapolis’ students could read at grade level, and only 35.8 percent met mathematics expectations.
Minnesota does not have laws that authorize the state takeover of a public school district by the Minnesota Department of Education. Unless the district chooses to combine with a neighboring district, it must find its own way to strong governance. Concerned families and community members should consider serving the Minneapolis Public School District with their time and involvement.
