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Misuse of Funds Procedure

Description and Scope

This procedure, adopted by the regional arts councils, defines misuse of funds, outlines investigation and documentation of misuse, establishes a range of consequences when misuse has occurred, and outlines a process by which a grantee may appeal consequences.

This procedure applies to funds a regional arts council receives from the State of Minnesota from its general fund, its arts and cultural heritage fund, or any other state funds. Further, SEMAC reserves the right to apply this procedure to funding from other grant makers or donors.


The intent of this procedure is to ensure that regional arts councils are managing state funds in a consistent manner; that similar consequences will be imposed when misuse of state funds occurs, and that a grantee that has misused funds will lose privileges statewide, not just in the region in which it resides.

Definition: What constitutes misuse of funds?

Misuse of funds means using State of Minnesota resources for any purpose other than those allowed by:

  • State of Minnesota statutes, law, rules, policies; and
  • The regional arts council receiving and disbursing the funds; and
  • The program guidelines or grant contract through which funds are disbursed.

Misuse can happen both intentionally or unintentionally. Intentional misuse occurs when the grantee knowingly spends funds in ways that are outside the allowable parameters of the State, the council, or the program. Misuse also occurs when a grantee spends funds in ways that are inconsistent with the submitted proposal and budget. Unintentional misuse generally occurs as a result of miscommunication or misunderstanding.

Whether the misuse is intentional or unintentional — notices and consequences will be issued.

A grantee that is unable to complete all proposed activities is not misusing funds. For example: An artist receives a grant to conduct residencies in 3 schools—three months in school A, three months in school B, three months in school C. Midway through the project, and before activities have happened at school C, school C decides it is unable to host a residency. It is too late to find a replacement school; one-third of the awarded funds will be unspent at the end of the grant period. The grantee will need to document how funds were spent, and return any unspent funds. Unspent funds are not misuse. The notices and consequences of the Misuse of Funds Policy would not apply in this situation.

The full document goes on to address:

  • When and how to identify misuse
  • Responsibilities of council when misuse has occurred
    • Verification and documentation
    • Notice of misuse and consequences to the grantee
    • Notice to the State Arts Board
    • Recovery of funds
    • Consequences
    • Reinstatement
  • Appeal Process