Committee report: Majority Recommendations

Fraud Prevention Committee Majority Recommendations

2026 Legislative Recommendations:

1. Independent Office of Inspector General in Executive Branch (Norris/Anderson HF1) 2. Expand statute of limitations on fraud crimes to 10 years (Meyers, HF 4425) 3. NonEmergency Medical Transportation (NEMT) providers required to operate vehi cles equipped with a global positions system and rear-facing camera, compile information for each trip, and retain recordings for two years (Robbins, HF 4684) 4. Criminal penalties for making false statements to or falsifying documents given to the Office of Legislative Auditor and extending the statute of limitations for prosecution of fraud in public programs for ten years (Robbins, HF 4664) 5. The Commissioners of DHS or DCYF must disclose an investigation of possible overpayments of public funds to a service provider or recipient or the reduction or withholding of payments within 30 day of a request if the Commissioner has taken action to reduce, suspend or withhold payments to the subject of the investigation and the disclosure will not harm the investigation. (Robbins, HF 4029) 6. 100% Tax on income obtained through fraudulent means (Anderson, HF 4950)

Future Legislative Recommendations:

1. Criminal penalties for providing material support or resources for terrorism (Robbins, HF 4503) 2. Providers, vendors, and individuals seeking to receive public money for providing services required to submit proof of operation and finances for the most recent three years (Robbins, HF 3850) 3. Use of video surveillance to confirm alternance claims by daycare providers (West, HF3819) 4. Creating accountability and consequeces for agencies and state employees enabling fraud (Niska, HF 3395) 5. Continued submission of a report to the legislature on the use of periodic data matching in medical assistance required (Schultz, HF 4101)

Additional Recommendations:

Recommendation 1: Increase agencies’ investigative and payment withholding authority for individuals and business entities connected to charged or convicted fraudsters.

Through the fraud convictions in recent years, it has become clear that criminals are often not acting alone, and that fraudulent businesses exist within a network of providers, relatives, associates and more.

A clear example can be seen in the case of Gandi Mohamed, who pled guilty to his role in the Feeding Our Future fraud scheme in April 2026. For Mohamed, fraud was a family business, in which he held the role of “landlord” as his friends and family pretended to serve children meals out of a building he owns and gave him proceeds as “rent” to launder the money.

In December of 2025, the Committee exposed that Mohamed is also the property owner of five properties used as taxpayer-funded assisted living facilities operated by family members and associates. DHS stated that they did not believe they have authority to take action against the assisted living facility operators since Mohamed was just a “landlord” and was not providing the services, despite the fact that as the “landlord” he was receiving taxpayer funds.

Recommendation 2: Require agencies to proactively report fraud concerns, certain billing trends, oversight gaps and updates on OLA recommendations.

In the committee’s hearing EIDBI (Autism) centers, Members were frustrated to learn DHS had waited for over a decade to request additional tools to combat fraud in the program, citing a lack of authority given to them by the Legislature. State agencies should proactively tell legislators where they lack oversight of programs or gaps in statute, even if they don’t have specific language to address gaps available yet.

The Majority recommends a mandated biennial report from each agency, by program, to the Governor, the new Executive Branch OIG, the OLA, and the Legislature. The report should identify any gaps in statute or any tools needed to enhance oversight of public programs under their jurisdiction. The report should also include an update on every OLA recommendation in public programs or grant programs under their jurisdiction.

Building on the O’Malley Report recommendations, agencies should incentivize and reward employees who identify gaps in oversight tools and statute and contribute to this report. Frontline workers know many of the gaps exist but are often afraid to raise them out of fear of retaliation.

Recommendation 3: Technology Modernization and the use of AI to detect patterns of irregularity in billing and grants.

The Committee heard testimony in a number of hearings, including in the Governor’s fraud prevention proposals, that the technology counties use to administer welfare programs is so outdated it actually contributes to errors and makes it hard to detect fraud. We support modernizing technology and incorporating the use of AI to detect billing abnormalities, flag interconnected providers or providers in multiple program areas, and track increases in payments or enrollment that exceeds projections for further investigation.

While this will require significant state investment, we expect that it will pay for itself by reducing fraudulent payments and increasing employee productivity, possibly even reducing the FTEs.

Recommendation 4: Require electronic attendance records for childcare, adult day care, sober homes, autism centers, NEMT, ICS, and other billable services. Records must be submitted and approved biweekly, beforepayments can be made.

During the Committee’s hearing on Non-Emergency Medical Transportation (NEMT), testimony was given about the need to use cameras and GPS or telematics tracking to identify and prosecute fraud. HF4648 (Robbins) would implement this recommendation.

During the Committee’s hearing on CCAP, testimony was heard from a former fraud investigator at DHS discussing the value of video surveillance to confirm alternance claims by providers. HF3819 (West) would implement this recommendation.

During the Committee’s hearings on Feeding Our Future, NEMT and CCAP, there was testimony in support of using electronic attendance records and discussion of withholding payments until attendance at appointments, childcare or meal sites was verified.

Recommendation 5: The state of Minnesota cannot rely on attestation when enrolling providers Medicaid programs. We must have documentation and in-person site visits, not attestation, before providers can start billing state programs.

In multiple hearings we heard testimony that the low barriers to entry in many of these public programs has made it Minnesota a “mark” for criminals seeking to defraud public programs. There have been numerous stories by investigative journalists, and our own Majority staff, which show providers billing for services out of non-existent addresses or locations that could not possibly provide the level of service being billed for.

The state should not allow a provider to enroll until they have submitted documentation that they have: • Filed and keep current the proper business filing with the Secretary of State or the proper charitable organization registration with the Minnesota Attorney General; • Demonstrated financial and operational capacity to participate in public programs; • Received an unannounced in-person site visit; • All owners/operators are disclosed and have completed a background check to ensure no disqualifications • All staff meet basic qualifications for providing the services (no 16-year-olds working as “behavioral technicians” to provide autism services)

Recommendation 6: Recipients must submit documentation of eligibility, including proof of citizenship and income verification, before they are enrolled in state or federal programs.

Recommendation 7: Prohibit providers that provide housing within their setting from subleasing units to clients for less than what the provider pays or fair market value. Verify rental agreements.

In 2025, the Minnesota Legislature passed language explicitly prohibiting kickbacks in the form of discounts in rent for a client enrolling to receive services from a provider. The Committee recommends further clarifying what would constitute a discount and strengthening the agency’s ability to verify transactions for housing.

Recommendation 8: Criminal Penalties and permanent disqualification from providing services for providers who prey on service recipients. Require agencies to follow-up on reports of sexual harassment or misconduct within 1 business day of receipt.

Recommendation 9: Agencies should keep accurate logs of whistleblower complaints and/or hotline reports and log responses. Email/hotline logs should be reported annually to the Commissioner and relevant department heads, as well as the to the Chair & Ranking Members of the Committees of jurisdiction.

A whistleblower reported seeing emails to DHS from vulnerable citizens who reported being asked for sexual favors in exchange for stable housing or other needed services. She further reported that the general response to these serious allegations was a form letter of how to get help from other agencies.

Recommendation 10: Cap the amount programs or individual benefits can grow each year and monitor the growth in demand versus the growth in provider capacity.

As was noted in the hearing on Adult Day Services, the number of providers grew by 43% while the number of recipients grew 7% over the same period. Safety net programs that are intended to provide temporary assistance should not be allowed to grow unchecked.

Recommendation 11: Require MMB to evaluate duplicative programs or services across the enterprise.

As we learned during our hearing with Minnesota Management and Budget (MMB), that agency has statewide responsibility for internal controls but does not see its role as enforcing those policies. Rather, they see their role as “supporting” agencies in their mission.

One of the most important contributions MMB could make to fulfill budget management function is to do an in-depth analysis of all programs that provide similar services – within and across agencies. Once we understand how many duplicative or similar programs exist, they should recommend eliminating and consolidating these programs, which will save taxpayer dollars, make the system easier to navigate for recipients, and eliminate multiple layers of employees performing relatively the same function in different programs.

For example, Minnesota currently has four programs that help address housing stability for at- risk populations (down from five after the closure of Housing Stabilization Services): • Customized Living • Assisted Living • Community Residential Services • Integrated Community Supports (ICS)

Evaluating where these and similar programs overlap and how they could be streamlined should be a top priority.

Recommendation 12: Ensure independent assessment of service needs for new clients across all programs.

In the hearing on fraud in the EIDBI (Autism) program, we learned that the person CMDE assessor who evaluates the child and recommends the level of services needed is often an owner of the business providing the service, thus they are incented to recommend the maximum services to increase billing.

Similarly, whistleblowers have reported that county case managers sometimes approve higher- than-necessary service levels so providers can bill the maximum amount. They reportedly maximize the service recommendation either out of friendship with the provider, because they get a kickback, or because they don’t see a negative consequence – it is just “free money” so why not recommend the maximum?

We need to ensure that those approving the service levels that can be billed are qualified to evaluate the needs and their compensation is not tied to the billable services.

Recommendation 13: Require providers to disclose ownership or management interests in any company that bill public programs and require DHS to maintain a “master list” of all providers with multiple owners and all owners with stakes in multiple companies that provide taxpayer funded services.

The Majority identified several interconnected webs of ownership and relationships that raised multiple red flags. Although DHS testified that they had scrutinized all of the Feeding Our Future defendants for ties to other programs, they couldn’t name any and didn’t seem aware of those we pointed out.

The OLA reports mentioned failures by providers to disclosure all ownership partners as a red flag.

Recommendation 14: Mandate reports on grant utilization at regular intervals to relevant Committee Chairs and Leads.

In the hearings and through whistleblower reports, we learned that not all grants are fully subscribed. Rather than returning the money to the General Fund, agencies will sometimes request extensions or expansion of eligibility.

How agencies “market” grant opportunities should also be reported and analyzed. There is concern that grants are often going to people or non-profits “in the know” or with ties to agencies officials, rather than being truly open to all qualified applicants.

Recommendation 15: Establish penalties or require reporting to committee of jurisdiction if a mandated report is missed. MMB should post on its website a list of all mandated reports, due dates and whether or notthe reports were submitted and the date submitted. Failure to submit reports on time should result in a reduction in agency administrative fees/budgets by 1% for every month they are late.

As of March 2026, the Majority was aware of at least 28 mandated reports that have not been submitted to the legislature. This is a violation of law, and the Legislature should not tolerate it.

Recommendation 16: The Legislature should create agency “stop-payment” mechanisms that automatically kick in when a program budget increases by 50% over the previous year.

Former Speaker Kurt Daudt raised this during our hearing on March 9, 2026. The Legislature should have a circuit breaker mechanism to halt additional payments going out from agencies for programs that increase exponentially. This trigger, which would immediately stop payment when spending grows by more than 50% of the previous year, would incentivize the oversight taxpayers deserve and expect. Programs cannot grow on autopilot without anyone noticing because agencies will face a consequence for poor management.

If the stop-payment mechanism is triggered in a particular program, the program manager will be forced to come to the Legislature to testify why the exponential growth is happening and to request the stop-payment mechanism be lifted when the Legislature is satisfied that the issue has been resolved.

Recommendation 17: Every budget cycle the agency must submit a budget document that shows year-over-year growth in each program. Similarly, all budget spreadsheets submitted by the Legislative Budget Office (LBO) during Finance Committee budget hearings and Ways and Means hearings must contain columns adjacent to the proposed spending columns for the Governor’s budget, the House proposal and the Senate proposal, which show the amount spent in the previous budget and the percent increase since the previous budget.

We should not just write blank checks to agencies – we need to have a full accounting of every dollar appropriated and they’re allowed to only spend what is appropriated and no more.

Chair Robbins has been asking LBO to update the spreadsheets with year-over-year comparisons and percentage increases or decreases for 8 years. It is impossible to make sound budgeting decisions when the “base amount” is taken as the starting point and Legislators are not even given the actual amount appropriated in the previous biennium.

Programs should be justified every biennium to ensure that they’re operating within the statute and effectively performing their intended function or service.

Recommendation 18: At minimum, the annual internal controls certification process employed by MMB should requires agencies to analyze the growth in spending, providers and recipients versus what had been anticipated by the fiscal note or budget. Any anomalies should be flagged and reported to the Governor and committees of jurisdiction in the Legislature.