Auditor: 'Fabricated' Documents Hid 'Misuse' of $328K Grant

Updated: 12/07/2012 7:54 AM KSTP.com By: Mark Albert

Designer handbags by Miche. Pricetag: $731.

Fashionable "7 For All Mankind" jeans. Pricetag: $247.

Supplies and equipment to treat sleep apnea. Pricetag: $713.

Taxpayers picked up the bill for all of it, according to a scathing investigation by the Office of the Legislative Auditor.

"This should not have happened," Legislative Auditor Jim Nobles said in an interview with 5 EYEWITNESS NEWS in his St. Paul office.

His office released the results of the investigation Thursday into the Sierra Young Family Institute. Click here to read the report.

The group, based out of a home in St. Paul, received a total of $328,993 in grants from the Minnesota Department of Health during the past two fiscal years to improve health services in the African-American community.

The Health Department twice extended the grant even after the Internal Revenue Service posted a notice of revocation of the Institute's federal tax exempt status on its website.

The Legislative Auditor investigation revealed hundreds of thousands of dollars in undocumented or unsubstantiated spending such as: payments of $95,810 to family members of executive director Roberta Barnes; $6,050 to pay the rent on her son's apartment; $22,320 in checks made out to herself; and $16,790 in ATM and other withdrawals, among other spending.

"The person who was in charge of this non-profit organization was quite skilled at fabricating documents to cover the nature of the expenses," Nobles said.

At the St. Paul house identified as the Institute's headquarters, a man who answered the door said Barnes was not home and identified himself as her husband.

"No, that's not true," the man said, referring to the allegations. When asked where the money went, he answered, "I don't want to discuss it right now." When a reporter followed up by asking if Barnes misused taxpayer money, the man said, "No, she didn't. No."

Deputy Health Commissioner Jim Koppel on Thursday declared, "we have to be better," and pledged full cooperation with a now-broader audit of the department's grants, which totaled $261 million in fiscal year 2012, awarded to non-profits, local governments and individuals.

"I do believe this is a one-time situation," Koppel said. "We have stopped it and we are taking steps to ensure that it will not happen again."

Click here to read the entire statement from the Minnesota Department of Health. Additional comments from the department were attached to the end of the Auditor's report.