The state’s legislative auditor found that the Minnesota Department of Education failed miserably in its duty to properly oversee millions of federal dollars it administered to nonprofits to feed children during the COVID-19 pandemic, according to a special review by the Office of the Legislative Auditor released Thursday, June 13.
The audit examined how MDE administered a child nutrition program for the U.S. Department of Agriculture and found the agency’s inadequate oversight “created opportunities for fraud.”
Federal prosecutors have charged scores of Minnesotans with ripping off the federal program by at least $250 million in the nation’s largest pandemic fraud scheme. Federal prosecutors say they gave away very little food, but got paid millions of dollars, which they used to buy Porsches and Teslas, vacations in the Maldives and homes from Prior Lake to Kenya.
Prosecutors have charged 70 people so far with being part of the Feeding Our Future case, named after one of two nonprofits at the center of the scheme. Eighteen people have pleaded guilty, one fled the country, and five were convicted of bribery, money laundering and wire fraud charges last week. Two were acquitted.
The nonprofits Feeding Our Future and Partners in Nutrition were supposed to oversee other vendors and nonprofits purporting to be giving away ready-to-eat meals at sites all over the state, but instead, prosecutors said they enabled and participated in the fraud, keeping a portion of the federal money doled out. Founded less than five years earlier, they grew from collecting a few million dollars a year before the pandemic to dispersing about $200 million each in 2021.
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Auditors found MDE failed to act on warning signs even prior to the pandemic; didn’t exercise its authority to make Feeding Our Future follow program requirements; and was ill-prepared to respond to the issues it encountered with Feeding Our Future.
As far back as 2018, MDE was getting complaints about Feeding Our Future and its food distribution sites, receiving at least 30 complaints from mid-2018 through 2021. And although the agency is required by law to promptly investigate complaints or irregularities, it didn’t investigate some complaints about Feeding Our Future at all. When MDE did follow up on complaints, its investigations were inadequate, to the point where “MDE inappropriately asked Feeding Our Future to investigate complaints about itself,” the report said.
MDE’s procedures emphasized having the complainants and subjects resolve complaints on their own, the report said. The first step of their process was to share the complaint with the subject, so they could investigate their own conduct and try to resolve it without MDE intervention. When that didn’t work, MDE would make a formal report of the complaint, but again they gave the subject an opportunity to respond. This created a system ripe with potential for retaliation.
The legislative auditor found MDE failed in numerous ways to prevent the fraud, including:
- By failing to use its authority to deny applications for the program years before the pandemic.
- By failing to verify statements made by the nonprofit Feeding Our Future before approving applications, especially “high-risk applicants.”
- By failing to follow-up on its 2018 review of Feeding Our Future’s child nutrition operations which raised concerns
- By only conducting limited off-site monitoring of food distribution sites.
MDE did stop payments to the nonprofit in 2021, but Feeding Our Future sued the state, alleging racial discrimination. Ramsey County District Judge John Guthmann ruled that the state couldn’t halt payments unless they found fraud, so MDE resumed payments.
In a written response to the report, Education Commissioner Willie L. Jett II said MDE’s oversight “met applicable standards” and the agency “made effective referrals to law enforcement.”
“What happened with Feeding Our Future was a travesty – a coordinated, brazen abuse of nutrition programs that exist to ensure access to healthy meals for low-income children,” he wrote. “The responsibility for this flagrant fraud lies with the indicted and convicted fraudsters.”
Jett said the department has made changes to strengthen its oversight, establishing an Office of Inspector General, adding a general counsel’s office, training staff on updated fraud-reporting policy, and contracting with a firm to conduct financial reviews of certain sponsors.
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During the recent trial of seven defendants charged with defrauding the program, the director of Minnesota’s nutrition program acknowledged she got some pushback from her own supervisors when she raised concerns about suspiciously high reimbursement claims.
Emily Honer, director of nutrition program services for the MDE, testified that she quickly became suspicious of huge reimbursement requests and alerted her superiors, the USDA, and eventually, the FBI.
Honer testified that she was not aware of any MDE employees who went to the locations where people claimed to be serving unfathomable amounts of meals daily. She said her employees didn’t go to the sites because that was the responsibility of the nonprofit groups overseeing the vendors. And prosecutors said those nonprofits — Feeding Our Future and Partners in Nutrition — enabled and participated in the fraud.
Honer said due to Feeding Our Future’s “very nasty lawsuit,” MDE employees were often hauled into court and had to follow MDE protocol of working through concerns with the nonprofit sponsors overseeing the sites.
Outside of a month where MDE payments were stopped to some sponsors, MDE kept paying reimbursement claims until the FBI investigation went public in January 2022.
Republicans have blamed the Democratic-Farmer-Labor Party and Gov. Tim Walz for failing to prevent the fraud. Walz has said the state’s hands were tied by a court order to resume payments, although Ramsey County District Judge John Guthmann disputed that in a rare rebuke.
Honer testified that MDE opted to waive in-person monitoring of sites, but could still do “desk audits.” But Honer said she didn’t do any desk audits and didn’t ask any of her subordinates to do them — despite concerns that prompted her to go first to the USDA Office of Inspector General, and then the FBI, in April 2021.
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