The Minnesota Department of Education failed to act on early warning signs that could have prevented fraud, and didn’t use its authority to hold Feeding Our Future accountable, according to a report released Thursday.
The Office of the Legislative Auditor’s report on the education department found glaring weaknesses in the agency’s preparedness and response to fraud at Feeding Our Future, a nonprofit at the center of an alleged scheme that defrauded $250 million from the federal government that was designated to feed underserved children.
The 120-page report was shared with the Legislative Audit Commission in an intense afternoon hearing, where lawmakers on both sides of the aisle grilled education commissioner Willie Jett.
“The people of Minnesota want accountability, and the message I’m hearing from each of you is, ‘Well, we will do better’,” Republican Senator Steve Drazkowski said to Jett. “I don’t know how anybody in this state, commissioner, could believe you.”
The Minnesota Department of Education (MDE) is responsible for administering money from federal nutrition programs in the state. The agency failed to follow-up on several complaints about Feeding Our Future, allowed the nonprofit to investigate itself, and missed multiple chances to deny applications that allowed the organization to continue operating, according to the report.
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“The failures we highlight in this report are symptoms of a department that was ill-prepared to respond to the issues it encountered with Feeding Our Future,” the report states.
The Office of the Legislative Auditor used its own authority to investigate MDE’s oversight of Feeding Our Future. It offers a comprehensive timeline of issues at the now-defunct St. Anthony-based nonprofit, and highlights key moments where MDE could have held the organization in check, but didn’t.
Federal prosecutors and investigators have praised MDE for sounding the alarm on Feeding Our Future’s receipt of federal funding that was expected to feed children after schools shuttered their doors during the COVID-19 pandemic. The agency reported its suspicions about potential fraud to the U.S. Department of Agriculture in the summer of 2020, and to the FBI in the spring of 2021.
The report included a written statement from Jett defending his agency’s actions.
“MDE disputes the OLA’s [Office of the Legislative Auditor] characterization regarding the adequacy of MDE’s oversight – MDE’s oversight of these programs met applicable standards and MDE made effective referrals to law enforcement,” Jett said. “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. The responsibility for this flagrant fraud lies with the indicted and convicted fraudsters.”
MDE declined to comment further when contacted Thursday.
The education department distributes federal food-aid funds to sponsor organizations like Feeding Our Future and Partners in Quality Care. The sponsor organizations then disperse those funds to food vendors and food sites, which are supposed to provide ready-to-eat meals to local children.
Several organizations in the Feeding Our Future case reported serving thousands more meals than they actually did — or simply never served any meals at all — in order to receive more federal funds, prosecutors say.
Federal prosecutors allege that 70 defendants working with sponsor organizations in Minnesota stole $250 million, and used the money to purchase expensive cars, homes, a beach resort in Kenya and other items.
Feeding Our Future’s executive director, Aimee Bock, is also indicted in the case. The report says that MDE was too reliant on statements by Bock, who is only referred to by her title in the report, when evaluating complainants about the organization. Bock’s case is pending.
‘Warning signs’
Feeding Our Future was formed in 2016 and was approved by MDE as a sponsor organization for the Child and Adult Care Food Program (CACFP) in June 2017. In August 2018, Feeding Our Future received its first reimbursements for meals and snacks provided through federal programs, according to the report.
Reimbursements at Feeding Our Future grew fast before the pandemic. The organization averaged $61,500 in federal payments during the last five months of 2018, and grew to average $361,000 per month in the last five months of 2019. That growth brought attention, and allegations of wrongdoing.
“We think MDE failed to act on warning signs known to the department prior to the onset of the COVID-19 pandemic and prior to the start of the alleged fraud,” the report says.
The department received its first complaint about Feeding Our Future in June 2018, and 10 by the end of 2019. The complaints involved actions by the organization’s executive director, its recruitment of food sites to participate in federal food programs, and allegations that the organization was soliciting kickbacks from vendors, among others. All told, MDE received at least 30 complaints about Feeding Our Future from 2018 through 2021.
In February 2019, MDE completed its only administrative review of Feeding Our Future. That review should have prompted more follow-up and scrutiny by MDE, according to the auditor’s report. Instead, Feeding Our Future was approved as a sponsor for a second federal nutrition source, the Summer Food Service Program (SFSP), in June 2020.
The report found serious issues with the way MDE processed those complaints. The department “inappropriately asked Feeding Our Future to investigate itself,” and typically shared the complaint with Feeding Our Future as a first step.
In August 2021, the state received conflicting complaints regarding Feeding Our Future. A food site reported that Feeding Our Future had not paid a food vendor. The vendor told MDE that Feeding Our Future was extorting them for a kickback, which the vendor refused to pay.
Feeding Our Future staff told the state it wanted to file complaints against the site for submitting fraudulent claims, and said the site operators were soliciting a kickback from the vendor. Instead of seeking an independent investigation, the report says, MDE told Feeding Our Future to resolve the conflict itself.
Other investigative work was often delegated to the 15 MDE staff who worked with nutrition programs, and not trained investigators. When complaints came in, MDE did not have established personnel to accept and track what happened next, or a system to determine which complaints should be investigated immediately, the report states.
According to the report, MDE conducted a virtual visit to a Feeding Our Future food site in April 2020 by viewing video live streamed from Bock’s cell phone. MDE saw about 30 children receive meals in 15 minutes. The report says that Bock’s phone died, but that she told MDE that 1,800 children received meals over the next hour while her phone was dead.
“We have no evidence indicating MDE investigated this irregularity,” the report says.
Sponsor organizations like Feeding Our Future must apply annually to participate in federal food-aid programs. MDE reviewed and identified concerns in all of Feeding Our Future’s annual applications, the report found. But the state only provided technical assistance to Feeding Our Future, instead of taking the opportunity to halt its involvement in food programs.
MDE approved Feeding Our Future’s annual application in 2021 despite concerns about large projected “income” growth from sponsor sites, lack of dedicated financial or accounting staff and concerns that the nonprofit had not submitted a federal audit. The agency should have denied the 2021 application, the auditor’s report found.
MDE said in a response to the Office of the Legislative Auditor that the agency did not think it had legal authority to deny Feeding Our Future’s applications, due to a 2016 case with another sponsor organization, Partners in Nutrition. But the auditor’s office contends the department could have done more to lobby for legal powers in the years before the pandemic.
Partners in Nutrition, which is also known as Partners in Quality Care, has been named in court documents, and most of the seven defendants who were recently tried in the case worked with the organization as a sponsor. However, no one employed by Partners has been charged in the case.
A federal jury convicted five defendants on June 7 of crimes connected to defrauding the federal nutrition programs. Two other defendants were acquitted in the joint trial, the first in the case. Eighteen defendants have pleaded guilty in the case and await sentencing.
The report also criticized MDE for failing to follow through when it designated Feeding Our Future as “seriously deficient” in early 2021, a move that should have started a process to ensure compliance or terminate participation in food programs.
Feeding Our Future lost its nonprofit status with the Internal Revenue Service in February 2020 after not meeting reporting requirements for three straight years. MDE declared Feeding Our Future “seriously deficient” in January and March 2021 for its lapse in nonprofit status, and for failing to submit an audit as required. MDE deferred those serious deficiency rulings by June 2021.
The report does not include the legal battle that ensued over the serious deficiency designations. Feeding Our Future sued the state in March 2021 in order to keep federal funds flowing. That July, Ramsey County District Court Judge John Guthmann ruled in favor of Feeding Our Future, holding MDE in contempt for failing to process applications in a prompt manner. He fined the state more than $47,000.
“In the end, MDE missed opportunities to investigate allegations about Feeding Our Future’s administration of federal nutrition programs and take timely action to hold the organization accountable to program requirements, when warranted,” the report states.
Report’s recommendations
The report outlines recommendations for MDE, including that the department take additional steps to verify information that’s included in sponsorship applications, and that it conduct follow-up reviews. The recommendations also include prioritizing “program integrity” and “risk-based monitoring” if oversight requirements are waived in the future.
It also recommends that the Legislature create a statute or give MDE the authority to create rules for itself to establish criteria that it should follow when deciding whether to approve organizations for participation in federal nutrition programs.
MDE should change its procedures for investigating complaints regarding the federal nutrition programs, prioritize “independent fact-finding” and limit information that is shared with the subject of the complaint, the report says.
Jett, the education commissioner, said in his written statement that MDE’s oversight of federal food programs is frequently reviewed, and that the department uses critiques to continuously improve and prevent similar situations in the future.
The department has taken steps to improve its work, such as establishing an Office of the Inspector General in 2023 to assist in detecting fraud, Witt noted. Other efforts included creating dedicated legal counsel and updating the department’s fraud reporting policy and training.
“MDE has been intentional and focused on accountability and working to find agency-wide solutions to enhance program integrity and strong fiscal oversight,” Jett wrote.
Lawmakers dissatisfied with MDE response
Members of the Legislative Audit Commission said at Thursday’s hearing that they found the report “shocking” and “unbelievable.” They questioned MDE’s handling of the fraud, with several members arguing that the department didn’t do enough.
“Time and time again, throughout the four years that it participated in the child nutrition programs, MDE missed opportunities to hold Feeding Our Future accountable,” Legislative Auditor Judy Randall told legislators while briefing them on the report’s findings.
Legislators peppered Randall and Katherine Thiesen, director of special reviews for the Office of the Legislative Auditor, with questions throughout the hearing.
“They did nothing, or virtually nothing about it,” said Republican Representative Patti Anderson.
Jett and Maren Hulden, legal counsel for MDE, also gave remarks and answered questions. After Jett read a prepared statement, Republican Representative Duane Quam asked Jett if any MDE staff who oversaw the food programs had been disciplined.
Jett said it’s “not right” to blame anyone. Jett also refused to answer some questions, noting that he didn’t become the education commissioner until 2023.
“It would not be appropriate for me to speculate on why certain decisions were made,” Jett said.
Quam told Sahan Journal after the hearing that Jett’s responses didn’t answer lawmakers’ questions.
“Whenever a question was asked, he would see which statement was closest to that topic and repeat it instead of actually addressing the questions,” Quam said.
Several lawmakers said they felt that there was a lack of accountability from MDE in light of the report.
Anderson told Jett she hopes he can “clean up the department” and implement the report’s recommendations.
“I hope you, as commissioner, that that’s the way you look at your role, rather than defending practices, maybe some practices that occurred in the past, which are absolutely indefensible.” she said.
