Gov. Tim Walz proposes plan to fight fraud in the wake of Feeding Our Future scandal

Gov. Tim Walz has proposed adding an inspector general to the Minnesota Department of Education and spending more money on grant oversight, audits and fraud investigation in the aftermath of the Feeding Our Future scandal.

The fraud prevention plan that Walz debuted Tuesday was the DFL governor's first detailed outline of how he aims to change state government in response to one of the largest federal fraud cases in Minnesota history.

"We need to protect taxpayer dollars," Walz said in a statement. "This plan will help ensure that state government works as efficiently and effectively as possible to improve the lives of Minnesotans, while creating new tools to catch fraudsters and hold them accountable."

Walz told state officials earlier this year to review federal grant programs and come up with ways to improve state oversight. His four-part plan this week includes increasing staff in six state agencies to help manage and oversee grants, including a new inspector general at the Minnesota Department of Education. The Star Tribune pressed department officials earlier this month on whether they should add an inspector general.

He also proposed devoting resources to the Minnesota Bureau of Criminal Apprehension to track and investigate fraud allegations related to state-administered grants, along with additional auditors for the Minnesota Department of Management and Budget's internal controls team.

The governor did not immediately announce how many staffers he wants to add or how much the changes would cost. He will release his full budget proposal for the next two years in January.

Many of the fraud prevention efforts will require approval from the Legislature, which will be fully controlled by Democrats next year. One of the measures Walz is asking lawmakers to fund is development of a statewide grants management system, which would help "root out bad actors" across agencies and grant programs.

A spokeswoman for the governor said some proposed changes won't need legislative sign-off, such as asking the federal government to alter its practices to lower the risk of fraud.

"There are gaps in training, oversight and federal standards that, if addressed, would reduce opportunities for fraud and misuse of funds," according to the statement from the Walz administration.

There should be a one-stop option for reporting fraud, the statement said, and the federal government needs to clearly define the process to withhold payments to grantees who aren't meeting requirements.

Minnesota experienced one of the nation's largest pandemic-related fraud schemes, with people stealing $250 million in federal food aid intended to feed needy kids, according to federal prosecutors. The nonprofit Feeding Our Future was at the center of the scheme, according to prosecutors, who have charged more than 50 people in the probe.

The case led to sharp scrutiny of the Department of Education's management of the federally funded food program. It also became an election season issue, with Republicans condemning how Walz and Attorney General Keith Ellison handled the situation.

Rep. Ron Kresha, the GOP lead on the state's House Education Finance Committee, said Tuesday he's on board with the additional oversight Walz proposed but wants the state to go further to combat fraud. He said he hoped the issue finally can be taken seriously, rather than having state commissioners say there was nothing they could do about it.

"We can do things, and we should be doing things," Kresha said.

However, Sen. Jim Abeler, R-Anoka, said the Department of Education should no longer administer meals programs. He said counties or school districts should have that responsibility.

Incoming DFL Senate Majority Leader Kari Dziedzic said Walz was taking important steps to prevent fraud and safeguard taxpayer dollars.

"We look forward to hearing more details during the upcoming legislative session and will work with him to create needed protections and oversight to ensure every dollar is spent as intended," she said.

The Minnesota Council of Nonprofits also applauded the proposal, saying in a statement that it aligns with the council's recommendations to improve state grantmaking and reduce barriers and administrative inefficiencies.

Staff writer Jeff Meitrodt contributed to this report.