Investigation into Michigan's Kinexus Group underway following concerns of mishandled funds

BENTON HARBOR, Mich. -- Berrien County Commissioners met to discuss the future of Michigan Works and Kinexus Group after the executive director of Kinexus, Todd Gustafson, resigned from his position.

The investigation into Kinexus spans three counties and includes possible misused funds, $18 million and covid era paycheck protection program loans.

Berrien, Cass and Van Buren Counties together consitute a workforce development area under the federal Workforce Innovation and Opportunity Act and the Michigan Works One-Stop Service System Act. The area receives in excess of $18 million annually in federal and state funds for employment, training and related services.

Under federal law those funds are allocated to the Counties as chief elected officials, who are liable for their misuse.

Michigan Works was the first statewide, unified workforce development system in the country. Every Michigan region is represented by public and private sector leaders who try to match workers, their skills and local companies that need employees.

The Berrien, Cass, Van Buren Michigan Works! System was renamed Kinexus, a diversified non-profit running three Michigan Works! locations in Benton Harbor, Cassopolis and Paw Paw.

Mac Elliott, Berrien County Board Chairman explains, "well, they're joined at the hip. The Michigan Works! has Kinexus as its operating arm."

Kinexus is also known as the workforce development board. It's overseen by a group of elected officials from all three counties—called the Chief Elected Official Board or CEOB.

Commissioner Julie Wuerfel is on that board. This summer she learned about the interlocal agreement, which is at least 20-years-old.

"The interlocal agreement is the agreement between the three counties of how we'll govern the Workforce Development Board. So, how we appoint, how we oversee. Basically, what's in it currently, only our only job is to approve the executive director's contract, salary, and any changes. It's approve or deny. It is not to do. It is not to create, and it is not to appoint," explained Weurfel.

Over the summer, she started asking questions about why Todd Gustafson, Kinexus Group's executive director, was making well over $300,00 a year in total compensation at the taxpayer funded non-profit.

"I wasn't seeing answers to my questions of like, let's see a full list of financials, let's do this, let me see that. When I would ask those questions, they're like, "you don't need to worry about that. We do that, we have people that handle that," Weurfel explained.

Below is a screenshot of Kinexus’s most recent tax filing and breakdown how much money Gustafson was receiving.

A county review into about two thousand documents is still under way but officials say its already established three things.

• Decisions that should be made by the board of directors, the CEOB or the three county commissions were instead made by a committee of four to six people or, by no identifiable body at all.
• The financial reporting obligations Kinexus legally owes to the counties stopped being performed.
• The structure of Kinexus rests on a question raised 26 years ago. That is whether the counties had authority to establish a non-profit corporation for this purpose at all—and how does that $300,000 salary for Todd Gustafson compare to other Michigan Works! leaders statewide?

"I heard it was closer to 350. If you compare his salary with the salary for the counterpart, I think in Wayne County, an organization that's probably six times the size of what we have here in Berrien County, I think that person's salary was around 190. I'd say everyone's being paid a lot more than anyone else in the state for comparable jobs," said Elliott.

So, what is needed now? Answers from Kinexus.

The board of commissioners requested multiple documents and are expected to receive them at the end of next week, around Sept. 10. In the meantime, a Berrien County ad hoc committee was created to review three possible resolutions. Cass and Van Buren counties will do the same.

The possible resolutions are listed below:

• A new governing board with Kinexus continuing as administrative entity. The Counties would establish the workforce board as a public body by a new interlocal agreement among the three of them. That board, together with the Counties as chief elected officials, would then designate the corporation as administrative entity and fiscal agent on the written terms. The Kinexus would keep employing the staff, holding the leases, and running the service centers, but under a designation and a contract rather than as the board itself.
• A transition to a full public body, negotiated jointly with Kinexus: a memorandum of understanding on sequence and timing, a joint approach to the state and federal agencies on redesignation and novation of the grants, agreed terms for moving staff, leases, and program property, and an agreed treatment of assets, subject to whatever the funding agencies decide it avoids major disruption. Staff, operations, and participants are protected.
• A public body established by the Counties on their own authority. Concurrent resolutions, the governor's approval, filing, appointment of the workforce board, and designation of the new entity as administrative entity and fiscal agent. None of it requires the Kinexus' agreement.

When Chairman Mac Elliott was asked by a fellow commissioner if he foresees law enforcement becoming involved in this matter, he said he was not prepared to comment on that. Both Elliott and Weurfel stated it is early in their investigation.

Meanwhile, the workforce development board at Kinexus is establishing a search committee to look for a new interim director to replace Gustafson. He resigned and his last day was set to be Tuesday, September 8. However, ABC57 is told Gustafson is no longer on the job.

All of this came to light at a public meeting on Thursday where Commissioner Chowke Pitchford made a motion to waive attorney client privilege to made this public and Commissioner Julie Weurfel supported that motion.