Federal audit says Ohio MEP and Cleveland's MAGNET misused millions

CLEVELAND - A federal audit released Wednesday found that the Ohio Department of Development and regional organizations it funds to boost Ohio manufacturing didn’t comply with the terms for tens of millions of dollars in federal awards they received, including millions tied to MAGNET, the Cleveland-based manufacturing nonprofit.

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The report said MAGNET failed to report income from facility rentals and client fees, spent award money on unallowable events and marketing, overbilled indirect costs and had board members who benefited financially from their ties to the organization.

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His statement called the report “unfair and unbalanced,” noting that MAGNET represents about 22% of the questioned costs in this statewide report, but was cited 81 times in the report, 59% more often than the other five Ohio MEP centers combined.

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The Dec. 5 suspension of the award money forced MEP centers across Ohio to begin winding down operations, including releasing staff and halting modernization projects for hundreds of manufacturers, according to a letter from several U.S. Congress members from Ohio, who asked that the money be reinstated.

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The report said MAGNET failed to report income from facility rentals and client fees, spent award money on unallowable events and marketing, overbilled indirect costs and had board members who benefited financially from their ties to the organization.

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His statement called the report “unfair and unbalanced,” noting that MAGNET represents about 22% of the questioned costs in this statewide report, but was cited 81 times in the report, 59% more often than the other five Ohio MEP centers combined.

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Auditors found MAGNET generated $1,039,051 in rental income and $25,353,470 in client revenue from July 2017 through June 2024 that will require further review to determine how much should have been reported.

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Auditors found MAGNET generated $1,039,051 in rental income and $25,353,470 in client revenue from July 2017 through June 2024 that will require further review to determine how much should have been reported.

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One MAGNET board member, through his employer at Ohio State University, received more than $480,000 in contractor payments billed to the federal awards.

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MAGNET paid tens of thousands of dollars in internship wages to two companies whose executives sat on its board at the time.

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The report lists other unallowable spending by MAGNET, including $402,135 for public relations and video production, $60,252 for a headquarters groundbreaking event and $15,954 billed to the award for a celebrity speaker who never appeared at a virtual event.

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The report lists other unallowable spending by MAGNET, including $402,135 for public relations and video production, $60,252 for a headquarters groundbreaking event and $15,954 billed to the award for a celebrity speaker who never appeared at a virtual event.

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The report lists other unallowable spending by MAGNET, including $402,135 for public relations and video production, $60,252 for a headquarters groundbreaking event and $15,954 billed to the award for a celebrity speaker who never appeared at a virtual event.

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The report also questioned MAGNET’s economic impact reporting.

It says a manufacturer affiliated with a MAGNET board member reported identical results three years running.

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Although MAGNET certified the numbers as accurate each time, the report said it couldn’t explain to auditors how the same services could have produced identical results year after year.

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Although MAGNET certified the numbers as accurate each time, the report said it couldn’t explain to auditors how the same services could have produced identical results year after year.

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NIST ultimately rejected the 2025 figures but had already used the earlier ones in its own performance reporting, which members of Congress relied on to advocate for the MEP program nationally.

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NIST ultimately rejected the 2025 figures but had already used the earlier ones in its own performance reporting, which members of Congress relied on to advocate for the MEP program nationally.

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The report identifies a mix of waste and abuse, including what it said was unauthorized spending, as well as self-dealing by board members of the six local affiliates that received the federal money, which is passed through by the state.

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The audit recommends that the U.S. National Institute of Standards and Technology, which oversees the federal partnership, consider terminating Ohio’s funding permanently and try to recoup the money.

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The report identifies a mix of waste and abuse, including what it said was unauthorized spending, as well as self-dealing by board members of the six local affiliates that received the federal money, which is passed through by the state.

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Previously released records have detailed what federal auditors viewed as self-dealing among the agencies that spent the MEP money on the state’s behalf.

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In an audit released this week, the U.S. Department of Commerce’s Office of Inspector General faulted Ohio for poor oversight of $20.9 million it received over a decade through the Manufacturing Extension Partnership.

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Also, as a result of losing money, several affiliates announced plans to close.

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This triggered complaints from elected officials, who support the affiliates as vital training centers.

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This includes $2.3 million that Ohio’s MEP affiliates spent on what federal auditors described as unnecessary spending on events, marketing, sponsorships and similar costs.

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Before it was suspended, the state’s funding was set to expire regardless at the end of next month.

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The new audit, which covers program spending from 2017 through 2024, contains many of the same details that were privately shared with state and federal officials last fall.

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It said MAGNET needed to report the spending as program revenue, which could have resulted in it being eligible for a smaller amount of federal money.

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Among these charges were $62,954 that Ohio State University South Centers spent on promotional T-shirts, and nearly $100,000 that MAGNET spent on two events, a conference and what the audit described as a groundbreaking ceremony for a new headquarters. (MAGNET officials said the event the audit described as a groundbreaking ceremony actually was held to mark the launch of a new manufacturing plan.)

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Officials have been waiting for the audit to be completed since then.

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The audit also found the state improperly gave $9 million to Cincinnati’s TechSolve, even though the audit said the Cincinnati-area agency had failed its past performance reviews conducted by the state.

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Among these charges were $62,954 that Ohio State University South Centers spent on promotional T-shirts, and nearly $100,000 that MAGNET spent on two events, a conference and what the audit described as a groundbreaking ceremony for a new headquarters. (MAGNET officials said the event the audit described as a groundbreaking ceremony actually was held to mark the launch of a new manufacturing plan.)

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This included $250,000 paid to Ohio State University that helped pay Ned Hill, a retired OSU professor, to perform a manufacturing study while he also served as a board member for MAGNET.

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The audit said executives with both companies sat on MAGNET’s board when the internship money was awarded, although it doesn’t identify them.

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The final audit said it identified another $231,000 in payments to OSU involving Hill.

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The final audit contains some of the same details that were previously shared with state and federal officials and reported by Signal Statewide in February.

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One case is what the audit described as $45,158 paid to cover the salary of interns who worked for an unidentified “billion-dollar company with manufacturing facilities around the world” and $26,748 to pay another intern for an unidentified “publicly-traded multi-national corporation.”

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TechSolve in Cincinnati and FastLane in Dayton and the Center for Innovative Food Technology in Toledo were among the organizations that announced plans to either suspend operations or close completely.

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In another case, an official working for Polymer Ohio, a past recipient of MEP funding from the state, shared a residential address with a Polymer Ohio contractor, the report states.

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The final audit also contains some new alleged examples.

One case is what the audit described as $45,158 paid to cover the salary of interns who worked for an unidentified “billion-dollar company with manufacturing facilities around the world” and $26,748 to pay another intern for an unidentified “publicly-traded multi-national corporation.”

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MAGNET is still open – it even recently announced it received a $500,000 award from the Burton D. Morgan Foundation in Northeast Ohio – but has laid off roughly half its staff and sharply reduced its services.

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The MEP program dates back to the 1980s and is meant to boost small and medium-sized manufacturing companies.

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In Ohio, the services the regional nonprofit affiliates provided include apprenticeships, operational advice and technical assistance to help bring new products to market.

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Due to how the program is set up, the federal freeze also stopped the flow of state money going into the program.

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It receives federal funding, which is then matched by state funds.

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Initially expected in Spring 2026, that audit was released in late August, and it does not mince words, writing in its conclusion: “For nearly the past decade, ODOD and its subrecipients have misused millions of taxpayer dollars.”

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When asked specific follow-up questions about their understanding of how that $6.6 million were used and if they agree with the audit’s assessment of widespread abuse of funds in the program, Spectrum News did not receive a response.

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CIFT is a smaller organization than MAGNET, employing roughly eight full-time staff before funding was pulled.

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Now, she says it’s been able to secure some temporary grant funding to keep running, but the staff has been reduced from eight people to three people.

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Both Singer and Karp point to state audits of their organizations that found no issues with their expenses, with Singer sharing state audits of CIFT from 2017, 2019, 2024, and 2026 that didn't identify and misuse of MEP funds.

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“I’m a taxpayer. I want to make sure things are being done properly and I’m all for evaluation. But I think not having the ability to communicate the bigger picture is a challenge,” said Rebecca Singer, the CEO of CIFT, an MEP program in Northwest Ohio that focused on helping small food businesses grow.

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If Ohio isn’t awarded money for the program, that could mean the end of Ohio’s MEP program.

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After the funding was pulled last December, Ohio politicians like Rep. Shontel Brown and Sen. Jon Husted sent letters to the federal government asking for funding to the program to be restored.

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The non-partisan Office of Inspectors General are oversight units within government agencies that are tasked with performing audits and investigations that address waste and abuse.

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The MEP program started in Ohio, but has since spread across the U.S, with funds being distributed by the Federal National Institute of Standards and Technology.

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The Ohio Department of Development failed to report accurate financial results and ensure that Manufacturing Extension Partnership subrecipient expenses were allowable, according to an audit of an MEP award to the ODOD.

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Among other things, the report said the ODOD misrepresented financial results to NIST by failing to report program income generated by award funds and overstating nonfederal cost share.

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In December 2025, NIST paused $5.9 million in Ohio MEP program funds pending the results of an OIG audit covering program spending from 2017 to 2024.

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According to the report, the ODOD also: Approved direct costs incurred by the Manufacturing Advocacy and Growth Network and other groups that were “explicitly unallowable, unnecessary and unreasonable for award performance, or unsupported”

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Last year, the Department of Commerce terminated funding for 10 state MEP programs in an effort to reduce federal spending.

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In March, senators from both parties asked whether Under Secretary of Commerce for Standards and Technology and NIST Director Arvind Raman would continue the program before ultimately confirming him. During the hearing, Sen. Bernie Moreno, R-Ohio, noted that the OIG’s final audit had not yet been released.

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The report also said the ODOD understated its unexpended program income by $463,613 and overstated its nonfederal cost share by almost $5 million.

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NIST, part of the U.S. Department of Commerce, oversees a national network of MEP centers that comprises about 1,400 advisors and experts, 475 service locations and more than 2,100 partners.

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The report also said the ODOD understated its unexpended program income by $463,613 and overstated its nonfederal cost share by almost $5 million.

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Approved inflated indirect costs by that group and others

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Used award funds for unauthorized costs for subsidies and internships

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The final audit, released Sept. 19, determined that the ODOD, which administers the Ohio MEP, did not comply with key award terms and conditions of its MEP funding.

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Permanently remove known unreliable data on Ohio MEP economic impacts and other topics submitted by ODOD from NIST’s publications and website.

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Require ODOD to submit revised federal financial reports for all MEP awards since Oct. 1, 2016.

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Require award recipients to certify that all subrecipients were effectively monitored to ensure compliance requirements and performance goals were met, as well as certify the accuracy of subrecipient economic impacts.

Require award recipients to document reported economic impacts.

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The move garnered criticism from local politicians who defended the centers’ work.

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Its 2027 budget proposed eliminated funding for the program.

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The 38-year-old MEP has long been a Trump administration target.

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