Fraud becomes major campaign issue in Minnesota

State lawmakers and candidates for office have seized on the scandal and two OLA reports to criticize Gov. Walz for allowing waste, fraud, and abuse to proliferate under his watch.

The Minnesota Capitol building in St. Paul, Minn. (Department of Administration/Flickr)

A new report has found that a department in Gov. Tim Walz’s administration failed to comply with various state requirements for avoiding conflicts of interest, properly awarding grants, and correctly performing financial reconciliations.

On Wednesday the nonpartisan Office of the Legislative Auditor (OLA) released its “performance audit” on the Minnesota Department of Health’s (MDH) COVID-related grants. The audit investigated the MDH’s handling of roughly $200 million of state money awarded to health care providers during the pandemic.

The report stated that the failure to abide by the conflict of interest requirements in particular “leaves the state open to potential fraud and waste.” In response, MDH said state employees correctly filed conflict of interest disclosures, but did not retain electronic records of these disclosures, blaming it in part on the “[transition] from a paper-based system” during the outbreak of the COVID pandemic.

Health Commissioner Jan Malcolm defended the department in a Wednesday statement, saying that it had “adequate internal controls” and there was “no evidence” of “misspent, awarded inappropriately, wasted, or unaccounted” grant money from early in the pandemic.

Although the OLA auditors determined that the MDH’s internal controls were “generally adequate,” they also found identifiable weaknesses.

“Similarly, the department generally complied with the finance-related legal requirements we tested, but there were some instances of noncompliance related to grant awarding and grant monitoring,” the report added.

State Sen. Paul Utke, who serves on the chamber’s Health and Human Services Committee, accused the Walz administration of “hiding once again behind the challenges of COVID to deflect sloppy oversight and failed internal controls.”

“The taxpayers deserve better than yet another audit showing poor oversight and lazy accountability,” Utke said. “Senate Republicans will continue to hold government bureaucrats accountable to the highest standard.”

The OLA’s report is the second one in as many months. The nonpartisan office determined late last month that the Minnesota Department of Human Services (DHS) poorly managed its own grant money during the pandemic. DHS Commissioner Jodi Harpstead appeared before a Senate committee Tuesday to defend the notoriously embattled agency.

That same day, 47 Minnesotans were indicted for allegedly scheming $250 million out of the federal government as part of the Feeding Our Future scandal. Sen. Roger Chamberlain, chair of the Senate Education Committee, has repeatedly accused the Minnesota Department of Education, which oversees the programs Feeding Our Future participated in, of failing to do its job.

“I have been clear from day one: MDE could have and should have done more,” he said in a statement this week. “This is the largest case of COVID fraud in the nation because MDE didn’t do their jobs. The fraud was started and persisted because MDE failed to complete due diligence on these bad actors. They may have assisted in the investigation, but it’s too little, too late. Forty-nine other states simply did not have these problems and we are all wondering why Minnesota is different.”

The Department of Education defended itself in a statement to Alpha News, saying “MDE staff raised concerns with Feeding Our Future early on and escalated their reporting to the USDA, the OIG and the FBI.”

“Even when MDE stopped payments to Feeding Our Future, a court informed MDE the payments must continue,” the agency said.

State lawmakers and candidates for office have seized on the scandal and two OLA reports to criticize Gov. Walz for allowing waste, fraud, and abuse to proliferate under his watch.

“The buck stops with Governor Walz — what is he doing to hold his agencies accountable? Have any bureaucrats been fired for failing to follow state law?” Minnesota House Minority Leader Kurt Daudt said in a Wednesday statement. “The governor owes answers to Minnesotans on these audit reports, and the failure of his administration to stop the Feeding our Future Fraud Scandal.”

Ryan Wilson, who is running against current state auditor Julie Blaha, criticized her “failed leadership” in not identifying “red flags” pertaining to the Feeding Our Future scandal.

“Blaha was silent when the issue crossed her desk in 2021, she was silent when the FBI raided the program in January 2022, and she’s been silent since the Department of Justice brought charges against 48 individuals yesterday,” Wilson said. “It shouldn’t matter that this scandal happened under Blaha’s political party’s watch, Minnesotans deserve a State Auditor that will call out waste, fraud and abuse no matter which party is in power.”

Blaha responded to the criticisms in a statement of her own, saying Wilson was “misleading voters” about the role of the state auditor.


Evan Stambaugh

Evan Stambaugh is a freelance writer who had previously been a sports blogger. He has a BA in theology and an MA in philosophy.