Federal audit alleges Ohio’s Manufacturing Extension Partnership misused $20 million in funding
The Ohio Department of Development is under scrutiny for failing in its financial oversight duties of Ohio’s Manufacturing Extension Partnership and its regional service providers.
A federal audit by the U.S. Department of Commerce found that the state agency did not comply with award terms and conditions, alleging that Ohio’s MEP misused $20.9 million in taxpayer dollars and failed to verify subrecipients’ allowable costs.
ODOD operates the Ohio MEP Center, which distributed federal funding to six regional affiliate service organizations across the state to support Ohio’s manufacturers. Ohio MEP has been under investigation for two years, and millions in federal funding were paused after OIG published its preliminary findings last year.
The DOC’s Office of Inspector General published its final audit report in August and questioned nearly $30 million in spending over the last decade, along with a lack of financial oversight of MEP branches.
In the scathing report, OIG recommended trying to recoup the misspent funds and possibly ending Ohio MEP due to ongoing noncompliance.
“For nearly the past decade, ODOD and its subrecipients have misused millions of taxpayer dollars received through the MEP program,” the conclusion states. “Not only has ODOD given award funds to a failing subrecipient, but subrecipients also inappropriately spent funds for food, entertainment, and other unallowable expenses such as lobbying.”
According to the audit, ODOD did not report accurate financial results to the National Institute of Standards and Technology, which oversees the Hollings Manufacturing Extension Partnership and funds the Ohio MEP Center.
The auditors questioned $20 million in costs and identified $5 million that could be “put to better use,” according to the OIG. The audit also found $2.75 million in underreported program income and questioned the reliability of economic data reported by the Ohio MEP Center’s clients.
The NIST sponsors the MEP program and distributes federal dollars to state agencies to operate MEP centers.
The initiative helps Ohio’s “small and medium-sized manufacturers to increase sales, create jobs and generate cost savings through technological innovation, workforce training and improved management practices,” according to the website.
In December 2025, NIST suspended federal funding for the program, and Ohio’s Department of Development suspended the MEP Program while the OIG review was ongoing, NBC4 News reported.
Ohio’s six MEP branches have closed or downsized since the funding loss. MAGNET in Cleveland has laid off 40 employees and is now operating at half its previous size, Ethan Karp, CEO and president of MEP branch MAGNET in Cleveland, told NBC4.
In a follow-up report by NBC4 News, Karp disputed the OIG’s findings and called the report “hugely inaccurate.” Karp claimed 95% of the allegations were false.
“We never had a proper chance to respond to their specific claims,” Karp said. “That is completely unfair. That is flawed. That is a bad process.”
The Ohio Department of Development said the agency cooperated with the IG throughout its multi-year audit and takes the findings seriously.
“The Ohio Department of Development … is committed to responsible stewardship of public funds,” the ODOD said in a statement. “We have zero tolerance for fraud, waste and abuse, and we expect the programs we administer, and the organizations that receive public funds through those programs, to meet the highest standards of accountability and compliance.”
Among the key findings, the Department of Development did not ensure subrecipient expenses were allowable under the MEP program.
“ODOD did not effectively monitor subrecipients’ compliance with award terms and performance and did not report on subrecipients as required,” the audit said. “ODOD did not verify the accuracy of the Ohio MEP Center’s economic impact data.”
The ODOD is one of the largest recipients of MEP funds and distributes federal awards to six subrecipients across the state via annual subawards. These subrecipients, which operated as nonprofits or through colleges, offer services to manufacturers in exchange for a fee.
Since Oct. 1, 2016, ODOD has received almost $52 million in federal funds. In fiscal year 2025, the federal funds passed through to each subrecipient ranged from $400,000 to $2,376,983. A prior audit in 2010 had similar findings, with auditors questioning nearly $7 million in costs and finding more than $1.4 million in unreported program income.
