Minneapolis, MN (MinnPost)
Before they launch a war on fraud, Minnesota’s political leaders first have to wage a war over fraud.
Perhaps by the end of the 2025 session, that is if the session ever really begins, Gov. Tim Walz and the Legislature will agree on how to take on the theft of government money meant for food, housing, child care, autism and other social programs. But because fraud was such a loud and potent political issue through the last two election cycles, it is proving hard for partisans to give it up.
Walz, Republicans charge, has either been asleep at the switch or indifferent to fraud in social programs. Waste, fraud and abuse has been a popular accusation and also a response to the current financial pressure to reduce, or at least control, state spending.
Walz and Democrats have condemned the hundreds of millions in theft by organized rings posing as providers. But they are protective of the programs aimed at low-income residents and until recently have combined those sentiments with condemnations that are aimed at thieves and not the government agencies.
“They are so damaging,” Walz said earlier this month of the scandals. “They undermine people’s faith in government, they undermine the very programs that improve people’s lives. This is fraud against the taxpayers of Minnesota, but the crime is perpetrated upon children.
“I want us to take that attitude seriously,” Walz said.
Both Walz and legislative Republicans have introduced packages of proposals such as stiffening penalties, making state bureaucrats more skeptical of applicants and recipients and even using AI to spot patterns before thefts can occur.
Walz struck first with his package just after the New Year. Standing with state law enforcement, budget and IT leaders, the DFL governor said that while there is no evidence that state workers profited from thefts of child care assistance, children’s feeding programs and now autism services, they need to be more suspicious.
“I think there’s a culture of generosity. I think it is a culture of being a little too trusting on this,” Walz said of those who oversee grant programs. “I don’t think those are bad character traits. But I don’t think they are necessarily effective at a time when we’re seeing fraud increase.”
That reflects a conclusion reached by Judy Randall, the head of the Office of Legislative Auditor, after releasing her findings in the Feeding Our Future scandal that involved charges against 70 people for the theft of $250 million meant to feed children. The OLA found that while some state Education Department employees were suspicious and that the case was eventually turned over to federal law enforcement, state managers didn’t do enough to interrupt the fraud.
Agencies often speak of working “with” beneficiaries of programs because they have a passion for the benefits that often result,” she told the Legislative Audit Commission. The education department referred to the organizations that received child feeding money as “clients” and “patrons” rather than applicants or grantees.
“Not that that’s wrong, but you can’t just trust everybody,” Randall said of the message the terminology sends. “I wish we could but clearly we can’t.”
Walz said he will create, via executive order, a fraud investigation unit that will combine current efforts by the Bureau of Criminal Apprehension and the state Department of Commerce.
He then asked the Legislature to:
His budget plan called for an additional $45 million in spending to pay for the new efforts.
Legislative Republicans so far are reluctant to give Walz much credit for the plans, calling them too little, too late. They are also unwilling to give up such politically valuable criticism of the 14 years of DFL administrations, which included a series of financial scandals under both Gov. Mark Dayton and Gov. Tim Walz. They include the misuse of funds under the Child Care Assistance Program during the Dayton administration and most recently with accusations of fraud under an autism treatment program.
“It has been shocking for me to come back the last few years and see what has happened in state government,” said Rep. Patti Anderson, R-Dellwood, who was state auditor from 2003 to 2007 before being named commissioner of Department of Employee Relations under Gov. Tim Pawlenty. “Minnesota was a good government state.”
Citing Biden-appointed U.S. Attorney Andrew Luger’s prosecutions of Feeding Our Future cases and his statement that no other state had similar scandals in the feeding program, Anderson suggested Walz’s proposed spending controls in the disability waiver program in long-term care wouldn’t be needed if fraud was contained.
“Why?” she asked. “You have half a billion dollars that we know of already and those dollars should go to serve citizens who need services.”
The dollar amounts — fraud losses and Walz’s proposal for slowing the growth of senior citizen long-term care — aren’t comparable, however. Walz’s proposal to slow the growth in spending on what are called disability waivers says that without it, spending on the program will grow from a little less than $2 billion a year in 2022 to more than $5 billion by 2029.
And DFLers object to GOP assertions that they have not acted in the face of scandals like Feeding Our Future and do not agree that GOP administrations were scandal-free. In an op-ed late last year, Senate Taxes Committee Chair Ann Rest, DFL-New Hope, described a hearing in which the Office of the Legislative Auditor was noting the lack of transparency and accountability over $4.7 billion paid to nonprofits, including $1 billion the state or counties had handed out in the form of grants.
The year was 2007 and Pawlenty was governor.
“Since 2023, the DFL majorities and the governor have acted in dozens of ways to increase transparency and accountability in the spending of public money,” Rest wrote. “Chief among them was 10 pages of new law and funding for the Office of Grants Management.”
House Republicans are proposing their own batch of bills and created a new committee focused on fraud investigations that will be chaired by Rep. Kristin Robbins, R-Maple Grove, (though Friday’s Supreme Court ruling means neither are official). Among the bills are a new matrix that will measure and publicize how state agencies respond to negative findings in Office of Legislative Auditor reports, mandating that state employees who see or suspect fraud to report it to investigative agencies and the Legislature and creating a new Office of Inspector General. The latter proposal by Anderson would create a sister agency to the legislative auditor that would report to the same bipartisan Legislative Audit Commission that she serves on.
That new office would absorb existing inspector generals that are housed in the departments of human services, education and corrections into an agency independent of governor-appointees. It would have power to investigate both agencies that distribute funds and those who receive money. It would have subpoena power and be able to order suspension of payments. While it would not have the authority to prosecute crimes, it would work with state and local prosecutors. Some of the inspectors would be embedded within agencies but report only to the independent inspector general.
The first proposal for an independent Office of Inspector General for this legislative session came from Sen. Heather Gustafson, a DFLer from Vadnais Heights. A draft of her proposal would create an independent inspector general with oversight from a new commission made up of people appointed by the four partisan caucuses of the Legislature as well as someone from the Bureau of Criminal Apprehension.
Gustafson said she heard a lot from voters about the Feeding Our Future scandal when running for the first time in 2022 and wanted to see if there was a better way to prevent fraud and punish wrongdoers.
“What I think people are looking for, at least what I hear in my district, is something genuinely independent of all the branches that will work to really identify any fraud, waste and abuse in any entity public or private that takes taxpayer dollars,” Gustafson said.
Her proposal would require the inspector general to meet specific standards including at least 10 years experience in auditing, investigations or law enforcement and be certified by the national organization of inspectors general.
To the criticism that a separate IG would not have the depth of knowledge about agencies and their programs that in-house IG’s now have, Gustafson said the IG can hire inspectors with that knowledge.
“They would just report to the IG instead of the agency heads,” she said. “An independent office is meeting the moment that needs to be met right now. What’s happening and what has happened the last few years is just unacceptable.”
Walz has said he is lukewarm to an independent office, thinking its inspectors wouldn’t have the depth of expertise that an inspector general within an agency would have. His example is the federal Department of Veterans Affairs, whose IGs not only knew the details of the agency and its programs but had veterans top of mind.
Randall was asked over the summer if her audit team should grow and be given new duties to investigate fraud and prosecute fraudsters. She suggested it would not be a good fit for her office, which has its hands full with its work auditing state agencies. But Randall said last week that the legislative auditor could work closely with an inspector general if that is what the Legislature proposes.
Randall noted that her office is charged with auditing the existing inspectors general in some state agencies and the office even found concerns with how an inspector general at the Department of Human Services performed when fraud was discovered in the Child Care Assistance Program in 2019. Lawmakers this session should include some way of having independent auditing of an independent inspector general.
Randall said she sees benefits with both an independent inspector general and having IGs embedded in agencies under commissioners appointed by governors.
“I don’t think the embedded structure is inherently flawed,” she said, though enforceable protections for that person are needed to ensure their independence. “I don’t think being embedded in and of itself is a show stopper.” The federal model uses embedded IGs and they are well-respected and considered to be free to find problems in their agencies, she said.
But the Friday mass firing by President Trump of 17 agency-based IGs suggests added protections would be needed in Minnesota. Both the Gustafson and Anderson bills have set terms for the IG and removal only for cause.
Unlike the federal model, Minnesota IGs could be appointed to a term and only removed for cause in a public hearing, similar to the independence protections the legislative auditor has, Randall said.
The benefit, Randall said, is they develop deep knowledge of complex systems and programs, knowledge needed to be able to see problems as they are developing. Inspectors general look at both the agency running programs and distributing money and those who receive the money.
“You need subject-matter expertise. You need to understand the rules, how they are licensed, who the licensees are, you need access to their data systems. It’s intense and targeted and focused work,” Randall said.
An independent inspector, however, could serve as the center of a hub and spoke model that facilitates data sharing and standards centrally but has inspectors embedded in the agencies. They would physically be within the agencies they inspect but work for the independent inspector general. That is a model envisioned in Anderson’s GOP bill which would place assistant inspectors general in seven agencies, including Human Services, Education and Children, Youth and Families.
Walz, who also included new funding for his fraud plan in his 2025-26 budget rollout last week, said that as with that budget, he is open to legislative ideas on fraud.
“We want them to help us if they have good ideas,” Walz said of Republicans in the Legislature. “You don’t need to find a fight when there’s none available. We agree with you. There’s certainly no upside to have fraud in state government.”
This story is provided as a service of the Institute for Nonprofit News’ On the Ground news wire. The Institute for Nonprofit News (INN) is a network of more than 475 independent, nonprofit newsrooms serving communities throughout the US, Canada, and globally. On the Ground is a service of INN, which aggregates the best of its members’ elections and political content, and provides it free for republication. Read more about INN here: https://inn.org/.
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