While Ohio’s politicians and business leaders plead for the return of millions in federal manufacturing grants frozen last December, newly released public records shine additional light on why the money may have been pulled in the first place.
Federal auditors questioned the Ohio Department of Development’s approval of spending $2 million in federal funds for its Manufacturing Extension Partnership, according to an agenda summarizing a meeting between state and federal officials in September. The program supports small and mid-sized Ohio manufacturers through affiliates across the state.
The costs in question included Ohio State University spending $48,240 to buy 11,000 T-shirts, and the Manufacturing Advocacy and Growth Network (MAGNET) in Cleveland spending $25,000 on a conference in 2021.
The MAGNET event was an example of what auditors described as “not allowable” promotional spending, which also included sponsorships of golf outings and galas, and “production videos, photography, ghost writing of articles unnecessary for the conduct of the award.”
The summary also notes that a previous federal audit flagged broader issues related to how the program’s state expenses were reported to federal officials in 2010 that still hadn’t been addressed.
“For years, ODOD and its subrecipients have acted without prudence of taxpayer funds,” the meeting summary reads.
The ODOD released the agenda for the September meeting, labeled as a “Pre-Exit Conference Briefing,” to Signal on Wednesday in response to a public records request.
Some of the concerns described in the agenda subsequently appeared in a notice the Commerce Department sent in December informing the state that it had suspended the program.
What the Manufacturing Extension Partnership does
The Manufacturing Extension Partnership is a federally funded program designed to help small and midsized manufacturers improve their practices and compete globally.
In Ohio, the program is administered by the Ohio Department of Development and carried out through regional nonprofit affiliates, including MAGNET in Cleveland, Ohio State in Columbus and FastLane in Dayton.
The program dates back to the late 1980s. But its future is in jeopardy after the U.S. Commerce Department froze millions of dollars in funding in December, citing the results of a still-incomplete audit by its Office of Inspector General.
Several local MEP Officials said they were blindsided by the program’s suspension and said state officials signed off on all their expenses.
The feds’ decision to pull the program’s funding also set off widespread protests from Ohio’s business community and elected leaders. Among those who pushed for the Commerce Department to restore the program were Sen. Jon Husted, a Republican, and Democratic Rep. Shontel Brown, of Cleveland.
They said the MEP helped develop Ohio’s manufacturing industry and make it more competitive. The funding is technically temporarily suspended until the audit is done, but it’s already having seemingly permanent consequences. FastLane closed this week as a result of the loss of federal funding and the Center for Innovative Food Technology in Toledo announced that it would close last month.
MAGNET, a program affiliate in Cleveland, remains open, but has laid off half its staff, CEO Ethan Karp said in an interview.
In April 2025, the Trump Administration canceled MEP funding for 10 states – none of which were Ohio – but reversed its decision following pushback from U.S. House Democrats, according to Manufacturing Dive, an industry trade publication. At the time, the federal government said it would extend funding for those states by six months to give it more time to reevaluate the program’s future.
The Commerce Department has said little publicly about its decision to cut Ohio’s funding. While it didn’t immediately return a message for this story, it has issued a brief statement to media outlets previously, saying it made the decision “after careful consideration of serious issues that were brought to our attention.”
The audit is supposed to be completed in May, according to public records, although the release previously has been pushed back.
What Commerce cited when it pulled Ohio’s funding, and what it didn’t
In the notice issued to Ohio officials in December, federal auditors cited multiple examples of MEP affiliates underreporting program income – which could have skewed how much the state was required to spend as a condition of the federal money it received. This could make it appear the state needed more money from the federal government than it actually did.
Among the organizations it singled out were FastLane in Dayton and CIFT in Toledo.
But the $2 million in promotional expenses – including the $25,000 MAGNET meeting and the $48,000 in T-shirts purchased by Ohio State – didn’t appear in that final notice terminating the program.
It’s unclear whether this means auditors became less concerned about those issues after hearing explanations from state officials, or if there’s another reason why they were excluded.
Auditors flagged possible self-dealing
Auditors in the September meeting also flagged a nearly $250,000 research contract award to Ohio State University. They described it as an instance “where board members received financial benefits by serving as vendors,” according to the meeting agenda.
At the time the contract was awarded, the recipient of the money, Ohio State University professor Ned Hill, also served as a board member for MAGNET.
But MAGNET CEO Ethan Karp said in an interview that what auditors flagged as a conflict of interest wasn’t actually how it may have appeared.
He said the state Department of Development picked OSU for the contract, and only later asked MAGNET to help administer it.
MAGNET’s lawyers reviewed the arrangement and signed off on it. Karp said he and other MAGNET officials have conveyed this to federal auditors.
“Because we had no role in the selection of this vendor, it did not constitute a conflict of interest, and we continue to assert this,” Karp said. “I feel very strongly about this.”
Researcher responds
In an interview, Hill, who has since retired from Ohio State and left MAGNET’s board, said he didn’t recall the contract particularly well.
But, he said the research involved surveying 200 local manufacturers to ask them how they used “smart” devices in their manufacturing – which at the time was cutting-edge technology. That work began around the late 2010s, he said.
Hill said he’s worked on the research for years, and it’s about to culminate in a book set to be published next year.
Hill said he’s heard from MAGNET officials that auditors have questioned the contract, but said he hasn’t heard from auditors directly. He said he’s careful to avoid conflicts of interest in his work.
“I remember having conversations within OSU saying this isn’t a conflict, because the work is with the state, it isn’t with MAGNET,” he said.
Through spokesperson Ben Johnson, Ohio State declined to comment for this story, citing the incomplete audit.
MAGNET defends questioned spending
Karp also addressed the $25,000 event auditors questioned. He said it was pretty typical and unostentatious – it included a breakfast spread and boxed lunches for participants.
He said his impression is that auditors didn’t question it as exorbitant, instead they felt the meeting wasn’t necessary at all.
Karp wasn’t sure if other issues federal auditors flagged – like golfing event sponsorships and ghostwritten articles – applied to MAGNET specifically. But he said his organization did things like that, under the idea that part of the program’s mission was to promote his organization’s work.
In the September meeting, the federal audit also questioned the state’s use of $608,000 in federal funds to pay for state programs. MAGNET’s share of the work involved a state internship program meant to promote interest by high school students in manufacturing jobs.
Karp said his understanding was the program was state funded, and that the federal audit questioned how the state recorded it in its accounting for the federal grant. He said he doesn’t have direct knowledge of how the state administered the money.
“If there is a mistake here, I get it. But these are reporting mistakes,” he said. “It should be about, ‘How do we correct that?’ Because everybody was still executing the program and getting good results.”
‘We are flying blind’
Karp said his organization has spent thousands of hours fielding questions from federal auditors and finding documentation to answer their questions. He’s frustrated that the feds suspended his organization’s funding before the audit’s completion.
This means he hasn’t had the chance to understand what expenditures the auditors have decided to accept after explanation, and which remain issues.
“We are flying blind,” Karp said.
Karp said MAGNET has reduced its workforce by half and now has 39 employees, focusing on its core mission of helping train students and meeting with local manufacturing businesses.
He said he’s exploring how to keep the organization’s doors open, and isn’t assuming the federal funding will ever return.
“I want the world to know that we’re open for business, and we’re not going to be stopped from helping manufacturers,” he said.