Audit finds 'pervasive noncompliance' in Minnesota agencies providing grants

Lawmakers asked for a review amid an investigation of the nonprofit Feeding Our Future. Employees and others are accused of using $250 million intended for meal programs for real estate and travel.

Close-up of Minnesota Capitol dome
Don Davis / Forum News Service file photo

ST. PAUL — A nonpartisan audit has found widespread issues with how some Minnesota agencies track grant money.

A new report from the Office of the Legislative Auditor released Thursday, Feb. 2, says the Minnesota Department of Education was not following state guidelines for grants.

“OLA has found pervasive noncompliance by state agencies with grants management policies in recent years, and statutes provide little authority to enforce agencies’ compliance with these policies,” Legislative Auditor Judy Randall said in a letter attached to the report.

Minnesota agencies distribute a significant amount of grant money to independent groups. From 2018-2022, they spent an annual average of about $514 million on state-funded grants for nonprofits, according to the report.

Lawmakers asked for a review of state agencies’ handling of grant money amid an investigation of the nonprofit Feeding Our Future, where federal authorities allege employees and others used federal funds intended for meal programs for luxury cars, real estate and travel expenses. At $250 million, prosecutors say it's the nation's largest pandemic aid fraud scheme. Fifty people have been charged in the case, including the nonprofit’s founder. Several have pleaded guilty.


The audit is focused on state funds and does not deal with the fraud alleged at Feeding Our Future, which involved federal funds that Minnesota agencies provided to nonprofits.

Overall, the audit found "systemic issues" with how the state handles grant tracking, and had several recommendations for greater accountability, including increasing external oversight of grants in government agencies. The auditor also found that state agencies use different methods to track grants to nonprofits, but there is not a comprehensive statewide system that allows legislators and others to review different agencies side-by-side.

The auditor’s report found that the Minnesota Department of Education only partly complies with grant management policies, and provided less oversight to grants awarded by the legislature than to competitively awarded grants. Additionally, the report said the education department has some management rules for grants, but it doesn’t provide enough written guidance to grant managers to ensure compliance.

Minnesota Department of Education Commissioner Willie Jett told the auditor his agency plans to address concerns raised by the auditor report.

“The department takes its responsibility to manage grants seriously and agrees that its procedures, training, and documentation can be improved,” he said in a letter to the Legislative Auditor. “MDE has already begun to take steps that are aligned with the two recommendations made by the OLA.”

Besides the education department, Thursday’s report includes a review of the Department of Public Safety and the Department of Administration, the agency that establishes policies for how agencies should handle grant money. The review found the public safety department “largely complied” with oversight rules but had room for improvement, and suggested the Department of Administration provide more specific guidance to agencies on grant policy.

Republicans in state government have said Gov. Tim Walz and other Democrats did not do enough to stop the alleged fraud at Feeding Our Future. In December, Walz proposed a plan to prevent fraud related to federal funds, and called for the creation of an inspector general at the Department of Education.

In September, a partisan report from the then-Republican-controlled Senate Education Committee found similar issues with the education department’s oversight of meal program dollars.


House Minority Leader Lisa Demuth in a Thursday statement said the report proves Republican concerns about nonprofit grant oversight are founded and accused DFL leaders of downplaying the issue.

“This is completely unacceptable, and we should be taking swift bipartisan action to implement the recommendations from OLA and consider what else we can do to ensure there is accountability within our state agencies,” she said.

Demuth added that the report in her view is not an “indictment of nonprofits” but instead of state agencies and their handling of grant dollars to independent organizations.

Follow Alex Derosier on Twitter @xanderosier or email .

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Alex Derosier covers Minnesota breaking news and state government for Forum News Service.
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