Tighten state oversight to prevent fraud

Opinion editor’s note: Editorials represent the opinions of the Star Tribune Editorial Board, which operates independently from the newsroom.

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When it comes to doling out state and federal funds, proper oversight is a continuing problem for some Minnesota agencies. Recent reports from the nonpartisan Office of the Legislative Auditor (OLA) indicate that agencies failed to fully scrutinize some of the programs for which they approved payments.

The Minnesota Department of Education’s (MDE) inadequate oversight of Feeding Our Future “created opportunities for fraud,” the OLA reported late last week. Earlier in the week, separate report found that the Minnesota Frontline Worker Pay Program had distributed funds to individuals who were not eligible for the payments.

The studies do not suggest that there was purposeful or intentional fraudulent mismanagement on the part of state employees. It continues to be important for state agencies to work with community partners to disperse federal and state dollars because the state doesn’t have the capacity to be the providers for numerous social-services funds.

Yet is it clear from the audits that more must be done tighten oversight and close down those “opportunities” to commit fraud. As Legislative Auditor Judy Randall told a legislative committee last week, the OLA found that “time and time again … MDE missed opportunities to hold Feeding Our Future accountable.”

Taxpayers expect and deserve state agencies to properly manage public funds.

The study of Feeding Our Future and another nonprofit, Partners in Nutrition, was released just a few days after a jury convicted five of seven defendants in the first trial against those who worked with the nonprofit. Seventy people charged so far are accused in connection with the theft of an estimated $250 million from a federal meal program. Following an FBI investigation, prosecutors say defendants turned in phony invoices on the numbers of children served and instead spent the money on homes, cars and trips.

In addition to the OLA study, a 2022 Star Tribune review of federal audits found that MDE was repeatedly faulted for its management of meal programs before the pandemic and that there were broader federal concerns about the U.S. Department of Agriculture’s sloppy oversight of the programs.

MDE should follow the auditor recommendations that include revising complaint investigation procedures, tightening verification criteria and doing follow-up reviews.

Commissioner Willie Jett, who has led MDE since 2023, told lawmakers that the department will implement OLA recommendations and that it has already strengthened its oversight, started fraud training for employees, contracted with a firm to conduct financial reviews of food programs and added an inspector general to investigate fraud allegations.

Also last week, the OLA released similar criticisms of the state Department of Labor and Industry’s handling of the Minnesota Frontline Worker Pay Program that distributed funds to front-line workers during the pandemic. That auditor evaluation shows that the Labor Department failed to verify hours and in-person work requirements to be eligible for payment and instead relied on self-reported work details.

As a result, some payments went to people who were not eligible and to others whose eligibility could not be confirmed. The study also found some blatantly fraudulent payments, including to people who used the names of individuals who had died before applications could be submitted.

In late April, the auditor found that the Department of Human Services’ Behavioral Health Division (BHD) failed to comply with some grants management rules, “including the requirement to obtain and maintain conflict-of-interest forms from grant application reviewers.” The OLA had a similar finding for this division in a 2021 audit.

In addition, neither the BHD nor the Minnesota State Arts Board (MSAB) completed all required pre-award risk assessments for grant awards. The recommendations in that case call on those agencies to follow their own grant-management policies.

On the payment program, Senate Taxes Committee Chair Ann Rest, DFL-New Hope, told the Star Tribune that she is frustrated by the fact that taxpayers ultimately had to foot the bill for some fraud.

“Something was let slip through that should have been an easy enough thing to do as brushing your teeth in the morning,” Rest said. “We were in times of turmoil but that does not excuse our carelessness with regard to the burden we are placing on the taxpayer.”