(Picture credit Matt Johnson)
OMAHA — After the State Auditor’s Office shed light on the “pathetic” progress, lax reporting, and potential conflicts of interest within an Omaha nonprofit, the Nebraska Department of Economic Development (DED) has suspended what remains of Nebraska Startup Academy’s $886,956.56 in North and South Omaha Recovery Grant Program money.
The notice of suspension, delivered Tuesday mere hours after Foley’s letter, cites the nonprofit’s financial mismanagement, undisclosed potential conflicts of interest, and unallowable spending as reasons for the action. While the nonprofit has not been disbursed grant funds in 11 months – with the Department citing noncompliance as the reason – suspension will not only rule out future disbursements, but require express DOD approval to spend, transfer, or otherwise use any of its remaining money from previous disbursements.
“The DED owes it to the taxpayers to preclude even an appearance of impropriety involving grant recipients” Foley said on Tuesday.
While DED had properly withheld funding to the nonprofit for over a year at one point over inadequate reporting, it had failed to properly verify data in subsequent reports and allowed numerous questionable practices to continue. Such practices were exhaustively documented in the Auditor Office’s 11-page dressing down of the Department’s oversights in this case.
Among the highlights were Nebraska Startup Academy’s $813,000 in payroll while having a total of only $1.3 million at its disposal, nearly 80% of which was state and federal funding.
“The department has allowability concerns about the percentage of grant funds that have been used to pay personnel costs,” the notice of suspension said.
“The department also identified several line items in Nebraska Startup Academy’s budget that are administrative in nature but not being grouped as administrative costs,” it continues.
Travel, taxes, and accounting costs are all beyond budget maximums – leading the department to question how the purpose of the grant is being served.
“The scope of the award is to ‘create approximately 60 startups’ and to ‘provide educational opportunities,’” they reiterate.
On that front, the Auditor’s Office had scrutinized supporting documentation for the nonprofit’s reported job creation and found that, against its 3-year projection of 300 jobs and its 2-year reported total of 46 jobs, NSA had actually created 4 jobs.
“Where are all those promised startups and new jobs?” Foley asked.
It had also reported vastly different revenue totals to the DED and IRS in the same calendar year. While the Department did not make mention of either of the reporting errors, it did raise the explicit mishandling of NSORG money within organization accounts:
“The recipient consistently transfers funds from its dedicated account to a separate account, where they are commingled with funds from other sources.”
Such is a direct violation of the grant’s terms – as is the most notable story emerging from the audit, the massive potential conflicts of interest in the nonprofit’s leadership.
Three of the organization’s four payrolled officers are partners at Omaha’s Move Venture Capital, which holds a controlling stake in one and partial stakes in two different companies that operated within Nebraska Startup Academy’s collective workspace in 2024.
NSA’s final payrolled officer is a member of Move Venture Capital’s Investment Committee, a non-compensated position, though her role at NSA pays six figures.
“Nebraska Startup Academy failed to disclose this potential conflict of interest where move venture capital may directly benefit from the grant-funded work done by Nebraska Startup Academy,” the notice states.
Between the Auditor and Department’s myriad concerns, NSA has an extensive to-do list to resume grant-funded operations, including submitting documentation for all expenses in addition to volumes of bank statements, reports, and disclosures.
“The preferred outcome for the Department is always to achieve the legislative purpose. Where projects can demonstrate that they have achieved or can achieved the stated intent, it is always the Department’s desire to allow curative measures,” a DED spokesperson told The Plains Sentinel.
“The Department’s ongoing monitoring and compliance efforts are to ensure that Nebraska Startup is meeting its contractual obligations as outlined in the award agreement.”
— Lewis Thune is a College Fix writing fellow with The Plains Sentinel.
Excellent journalism. If we had to rely on the OWH, we would never know about things like this.
Mike Foley "should" be one of the highest paid elected officials in Nebraska. He is a bulldog when it comes to uncovering fraud or mismanagement of government funds. He's Nebraska's Nick Shirley.