Tighten oversight of public funds

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

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Once again, an auditor's report has found that Minnesota state agencies are seriously remiss when it comes to overseeing millions of public dollars doled out to nonprofits. Agencies including the state departments of Education (MDE) and Human Services (DHS) are among those that have too often failed to comply with established oversight policies.

Minnesotans deserve better. State officials must get a handle on what the Office of the Legislative Auditor (OLA) dubs "pervasive noncompliance" with requirements for keeping track of where and how those millions are spent. Reports of poor oversight have been issued nearly annually in recent years.

Last year, for example, OLA found deficiencies in how Human Services handled more than $130 million in grants to local governments and nonprofit groups. Those funds were supposed to help the disadvantaged, including lower-income families, the homeless and the mentally ill. But the agency failed to document decisions about which groups should receive how much in COVID-19 emergency funds.

In addition, OLA reports were issued in 2018, 2019 and 2021 about bookkeeping and accountability problems at DHS.

Then, of course, there also was the widely publicized scandal last year when an estimated $250 million in federal food aid for children (administered through the state Department of Education) was allegedly stolen. More than 50 people associated with the nonprofit Feeding Our Future have been criminally charged, according to federal prosecutors.

It is past time for lawmakers, the administration and the agencies to put the brakes on these money management problems.

In the most recent report, the Legislative Auditor recommends that lawmakers increase oversight of grants management, improve statewide data collection on grants and boost training for state employees.

Back in 2007, national concerns about funds mismanaged by nonprofits along with OLA reports led to the creation of the Minnesota's Office of Grants Management, which developed 13 policies that state agencies are meant to follow. But the OLA finds that the office tends to focus on assisting agencies rather than enforcement.

Sen. Mark Koran, R-North Branch, said better oversight is needed and predicted the report will likely prompt new reforms. He chairs the Legislative Audit Commission, a bipartisan group that requested the OLA study.

"We've failed to do the very basics," Koran said. "We just want to make sure [state funding] goes to the people with great need, and waste, fraud and abuse just can't be tolerated."

Rep. Ginny Klevorn, DFL-Plymouth, said in a statement that the Office of Grants Management and other agencies have requested more resources to address the problem. To that point, Gov. Tim Walz recently proposed a fraud prevention plan, with funding for increased auditing and fraud investigations. His four-part plan includes increasing staff in six state agencies to help manage and oversee grants, including a new inspector general at the Minnesota Department of Education.

As the Star Tribune Editorial Board has suggested, an inspector role is needed. But a better approach would be to an independent Office of Inspector General separate from other agencies, with strong investigative authority. Lawmakers should also consider shifting oversight responsibility for some programs out of MDE and DHS altogether.

The Legislative Auditor's researchers consulted the Minnesota Council of Nonprofits, and the group said it supports many of the recommendations in the study. Representatives said the council has long urged improvements in the state's grantmaking system and recently released a report on how to develop a more efficient and equitable grants system.

The Editorial Board believes that for the most part Minnesota nonprofits use public money responsibly. But too many incidents involving mishandled funds have occurred over the years. The state must do whatever it takes to ensure that public funds are spent as intended.