New plan will improve oversight, prevent fraud related to federal funds; Plan calls for new Inspector General at Department of Education

[ST. PAUL, MN] – Governor Tim Walz today announced a new action plan to prevent fraud and improve oversight of federal grant dollars. Following his administration’s earlier directive to state agencies to identify areas of improvement, the Governor released a plan that includes a package of budget proposals.

“I am committed to rooting out and stopping fraud,” said Governor Walz. “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.”

Minnesota state agencies oversee thousands of grants, and recent fraud involving federal funds—both in Minnesota and across the country—has highlighted the need for new protections. Earlier this year, the Governor directed Minnesota Management and Budget (MMB) to work with other state agencies to conduct a review of federal programs and identify the most effective ways to improve state oversight of federal grants programs. While most grant programs are working as intended, the review suggests there are opportunities to enhance oversight and accountability.

The four-pronged plan will enhance enterprise-wide grant oversight and enforcement. While the Walz-Flanagan Administration can implement some of the state agencies’ recommendations on its own, others will require new legislation.

1. Expand and strengthen enterprise grants management. The Governor’s plan would expand the Office of Grants Management at the Department of Administration, ensuring the office has the resources it needs to provide policy leadership over all types of grants. The Governor will also seek additional agency capacity for grant administration and oversight. The Governor is also requesting that the legislature fund the development of a roadmap for a statewide grants management system. Such a system would help agencies identify and root out bad actors across agencies and grant programs.

2. Enhance resources for internal controls and oversight. The Governor will seek additional enterprise-wide auditing resources, which would be housed in the Internal Controls team at Minnesota Management and Budget. The Governor is also proposing resources for a coordinated approach to criminal investigations through the Bureau of Criminal Apprehension to track and investigate allegations of fraud in state-administered grants.

3. Target additional resources at key agencies and programs. The plan would strengthen individual agencies’ grants management programs. For example, a new Inspector General at the Department of Education and contracting staff at agencies will ensure grants have appropriate agency oversight. The Governor proposes adding staff at six agencies to enhance oversight and accountability.

4. Seek federal changes. Minnesota will request changes in federal practices to reduce risk of fraud in federal programs. There are gaps in training, oversight, and federal standards that, if addressed, would reduce opportunities for fraud and misuse of funds. For example, 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.

“Creating an Inspector General position within the Minnesota Department of Education is a critical step to ensuring proper oversight of federal funds,” Governor Walz continued. “I look forward to working with the state legislature and the federal government to ensure Minnesota’s state agencies have the guidance and resources they need to prevent fraud.”

“The BCA is committed to working with all state agencies to hold those accountable who seek to exploit programs designed to help Minnesotans in need ,” said Bureau of Criminal Apprehension Superintendent Drew Evans. “ Creating greater coordination, focused resources and strengthening these programs will ensure fraudsters are held criminally liable for their misdeeds .”

“ The Governor’s initiative is a big step forward to making grants oversight better ,” said MMB Commissioner Jim Schowalter. “With these proposals, we’ll have a simpler, less piecemeal approach to making grants and monitoring how the money is used.”

“The Governor’s initiative will provide the resources for enhanced and targeted tracking to ensure the intended use of grant dollars,” said Department of Administration Commissioner Alice Roberts-Davis . “Additionally, this initiative will allow the department to better assist agencies and recipients in facilitated applications and more effective grant administration.”

At the beginning of the COVID-19 pandemic, federal regulators relaxed grant oversight. Those regulations have since returned to pre-pandemic levels.

The Governor’s full biennial budget proposal will be released in January 2023.