The Minnesota Department of Education failed to protect federal money earmarked to feed underprivileged children from fraud and abuse, according to a new report by a state Senate committee.
The Senate Education Finance and Policy Committee released a three-page summary Monday faulting the department for not following state and federal laws in administering federal Child Nutrition Programs dollars. The report also alleges that the department “magnified the scope of the loss” of those dollars to fraud.
The FBI is investigating widespread alleged fraud of Child Nutrition Programs money in Minnesota during the first two years of the COVID pandemic. FBI search warrant affidavits unsealed in January allege that a network of several nonprofit food sites, restaurants, and people defrauded the government of this money for personal use, including lavish purchases of real estate, cars, and overseas trips. No one named in the investigation has been charged directly with crimes involving food aid fraud.
The Minnesota Department of Education has broad oversight of the federal funds and served as a distribution point by sending that money along to sponsor organizations like Feeding Our Future and Partners in Quality Care based on the number of meals they reported overseeing. The sponsor organizations then distributed that money further to smaller nonprofits, religious institutions, and other organizations who were supposed to buy meals for children.
The alleged fraud was simple at its foundation: Some organizations along the chain allegedly reported serving more meals than they did in order to receive more federal money.
In a prepared statement, state Senator Roger Chamberlain, R-Lino Lakes, called for a “full audit” of the education department’s handling of the money. Chamberlain is chair of the Senate Education and Finance Policy Committee, which held three hearings this year where department officials testified about the alleged fraud and investigation.
“Tens of millions of taxpayer dollars may be involved in this fraud, and the department simply cannot address the problem or recognize their mistakes,” Chamberlain said.
In response to Monday’s report, Minnesota Department of Education spokesperson Kevin Burns defended the department for raising concerns to federal authorities early on about the amount of meals Feeding Our Future claimed to fund using the federal dollars.
“Because of MDE’s [the Minnesota Department of Education] early action, the federal government opened an investigation, which we have fully supported,” Burns said Monday. “MDE moved quickly and repeatedly raised the issue to federal authorities until we were able to find someone who would take the troubling spending as seriously as we were.”
The FBI search warrants portrayed Feeding Our Future as a key player in the alleged fraud. But staffers with the organization, which folded last February, denied wrongdoing and accused the education department of discriminating against it becuase it served food sites run primarily by immigrants and people of color.
Burns noted that the department raised concerns directly with Feeding Our Future about its meal reports, and eventually went to the federal Office of the Inspector General, the U.S. Department of Agriculture, and eventually the FBI. He added that the department also froze federal payments to Feeding Our Future, but was subsequently ordered to restart the payments by a state judge.
Burns’ arguments are reminiscent of Education Secretary Heather Mueller’s testimony during the Senate hearings last spring.
The report, however, faults the education department for not acting on early warnings about the alleged fraud. The report cited a Sahan Journal story that featured Kara Lomen, a former colleague-turned-business-rival of Feeding Our Future’s executive director, Aimee Bock.
In October 2020, Lomen, executive director of Partners in Quality Care, warned the education department of alleged fraud in the Child Nutrition Programs. A department spokesperson previously told Sahan Journal that it raised concerns about Feeding Our Future’s meal claims to USDA that same month.
Federal dollars to both Feeding Our Future and Partners in Quality Care exploded during the pandemic. Feeding Our Future grew from $3.4 million in federal food aid money in 2019 to $43 million in 2020 and $198 million in 2021. Partners in Quality Care’s federal reimbursements during that same time jumped from $5 million in 2019 to $21 million in 2020 and eventually $191 million in 2021.
The report also fails the education department for not using performance bonds to track whether the food aid money went to its intended purpose. Performance bonds act as a type of insurance to ensure all sides who enter into a contract that the required work gets completed. Not doing this violated federal and internal department rules governing the food program, the report concludes, and amplified the alleged loss of tax dollars by 10 to 25 percent.
The Senate report also criticizes the department for scaling back its physical visits to sites serving the food as the fraud was allegedly ramping up in 2020. The issue was one of Chamberlain’s biggest points of contention during the committee hearings; he repeatedly questioned Mueller and other department staffers about the visits.
Mueller and her colleagues testified that federal COVID waivers allowed the department to stop in-person site visits in order to stop the virus’ spread. They also repeatedly characterized site visits as “one component” of the monitoring process, and said other monitoring practices like reviewing financial records prompted them to catch the alleged fraud.
The Senate report expresses skepticism of the education department’s arguments about the site visits.
“The department could have placed staff outside (in their car) of suspicious programs to monitor foot-traffic but chose not to,” the report says.
The report also criticizes department officials for asserting that their review process worked because it caught the alleged fraud. Such statements, the report reads, are “divorced from reality.” Chamberlain said he plans to monitor the federal investigation and will “conduct more hearings, if necessary, to get to the bottom of this.”