Walz plan would increase grants oversight in wake of food program fraud

ST. PAUL -- Minnesota Gov. Tim Walz on Tuesday announced plans to strengthen the oversight of grants administered by state agencies in the wake of the $250 million child food program scandal.

Walz’s office said in a news release that “recent fraud involving federal funds – both in Minnesota and across the country – has highlighted the need for new protections,” and that a recent review by state agencies found “opportunities to enhance oversight and accountability.”

“I am committed to rooting out and stopping fraud,” Walz said. “We need to protect taxpayer dollars. 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.”

One component of the plan would establish an inspector general at the Minnesota Department of Education, plus contracting staff at other agencies.

The education department oversees the two food programs that federal prosecutors say were defrauded of over $250 million during the coronavirus pandemic, when relaxed oversight made the programs vulnerable to abuse; more than 50 people have been charged criminally.

Walz also wants to work with the Legislature to:

• expand the Department of Administration’s grants management office and create a “roadmap” for a statewide grants management system;
• add more auditing capacity within the management and budget office; and
• establish a coordinated approach through the Bureau of Criminal Apprehension to track and investigate grant fraud.

Jim Schowalter, commissioner of Minnesota Management and Budget, said in a news release that Walz’s plan would create a “simpler, less piecemeal approach to making grants and monitoring how the money is used.”

In addition, Walz said he’ll advocate for changes to the way the federal government operates in order to reduce opportunities for fraud. Those changes would include clarifying how and when state agencies should withhold payments from grantees suspected of fraud.

The Minnesota Department of Education in late 2020 told the U.S. Department of Agriculture about implausibly high reimbursement claims in its child food programs.

But the education department didn’t stop making payments to the state’s largest food program sponsor, Feeding Our Future, until March 2021. And the department resumed those payments less than a month later after a state judge presiding over a lawsuit filed by Feeding Our Future warned that federal regulations don’t seem to allow the state to cut them off.

After criminal charges were filed against Feeding Our Future’s founder and dozens of people who received payments from the food programs, Walz publicly criticized the judge in that case. Walz now seems to be acknowledging that federal regulations played a role in perpetuating the fraud.

“The federal government should clearly define the process for withholding payments from grantees that are not compliant with grant requirements and should develop a one-stop option for reporting fraud,” Walz’s office said.

Walz, who will release his biennial budget recommendation next month, did not say how much his anti-fraud plans would cost. But lawmakers figure to be open to the discussion.

His DFL Party has the majority in both the House and Senate. Meanwhile, Republican leaders for months have been pressing for greater protections against fraud in the wake of the food program scandal.

House Minority Leader Lisa Demuth of Cold Spring said last month that the DFL must “finally take fraud seriously after they have ignored this issue in various forms for years. The Feeding Our Future scandal is just the latest glaring example of how we must better protect Minnesotans’ tax dollars.”