The Minnesota Department of Education is urging state lawmakers to pass a bill aimed at preventing the abuse of federal child-nutrition programs after dozens of suspects were charged with allegedly defrauding $250 million from them.
The Minnesota Department of Education (MDE) requested the new legislative provisions, which department spokesman Kevin Burns said are necessary to allow the agency to regulate “sponsoring organizations” involved in the food programs.
The department administers the federal food-aid dollars, which are earmarked to feed needy children, to sponsor organizations that then distribute the money further to “food sites” (nonprofits, community groups, and other organizations) that are supposed to serve ready-to-eat meals to children.
“This is MDE’s attempt at putting some parameters around what it looks like for a sponsor to be financially viable,” Burns said.
The bill comes in the wake of what Minnesota U.S. Attorney Andrew Luger called “the largest pandemic fraud in the United States.” Federal authorities allege that dozens of people took at least $250 million in food-aid money from the federal government by lying that they were feeding children. Instead, the government alleges, they spent much of the money on themselves, buying real estate, luxury cars, and cryptocurrency, among other items.
Sixty people have been charged in the case. Six have pleaded guilty. The alleged crimes first came to light in search warrant affidavits unsealed in January 2022. Several dozen people were initially indicted last September; more charges trickled out over time.
Under the proposed legislation, food site sponsors would have to prove that they have existed for at least a year and provide a tax return to the Minnesota Department of Education before accessing the federal funds. They would also have to provide a profit-and-loss statement, and demonstrate that 10 percent of their revenue comes from sources other than the food programs.
A food site could not operate within half-a-mile of another food site unless the education department grants permission under special circumstances.
“A sponsor who has been an active nonprofit organization for a year will have much more documentation on their finances and sources of revenue than a newly organized nonprofit would,” said Burns. “An organization that has other revenue sources than the sponsoring child nutrition sites has less incentive to commit fraud or other wrongdoing because they aren’t relying solely on meal claim reimbursements as their only source of revenue.”
Tax returns will also add another layer of accountability with state and federal tax agencies, and provide additional detail about the nonprofit’s finances, Burns said.
Federal authorities say that numerous suspects in the alleged fraud applied to receive federal food-aid money days after incorporating new businesses or nonprofits, supposedly for the purpose of feeding children.
The legislation is necessary because a 2017 Minnesota Court of Appeals decision curtailed the education department’s ability to create criteria for participation in the food program, Burns said.
The Minnesota Court of Appeals ruled in 2017 that the education department did not have the authority to create its own rules governing applications for the child-nutrition programs. In that case, the Minnesota Department of Education had required a sponsor organization, Partners in Nutrition, to demonstrate financial viability. The education department wanted Partners in Nutrition to apply to sponsor a single food site before the department would approve it to sponsor multiple sites.
The department also required Partners in Nutrition to demonstrate certain ratios of assets to liabilities, as well as positive cash flow. But the Minnesota Court of Appeals struck down the Minnesota Department of Education’s standards as “arbitrary and capricious.”
“MDE does not have the discretion to create its own unduly restrictive test,” Judge Lucinda Jesson wrote in the 2017 decision.
Since the Minnesota Department of Education cannot create its own rules, it asked the legislature to act, Burns said.
The proposed rules would also prohibit two food sites from operating within half a mile of each other unless they serve different groups of children, or if safety concerns might limit participation.
Burns said that under U.S. Department of Agriculture (USDA) regulations, a new site should not operate within “close proximity” of another site. But the regulations do not define “close proximity.” The USDA funds the child-nutrition programs.
During the height of the COVID pandemic, when the USDA loosened its regulations, the Minnesota Department of Education “attempted to limit sites that were operating next door to each other and even in the same building,” Burns said.
But since the federal regulations did not define the term, and the education department did not have the authority to define it, he said, “We could not limit the number of sites in a particular area.”
“Preventing multiple sites within a half mile of each other ensures that sites are available to children who need access to meals, but reduces the risk of multiple sites claiming meals for the same children and reduces risk of potential fraudulent claims,” Burns said.
The federal investigation into the alleged fraud found that some food sites supposedly operated very close to each other, and sometimes even in the same building. However, many of those sites never provided any food, according to authorities.
Many of the people charged in the case operated food sites through the sponsor organization Feeding Our Future. Aimee Bock, the founder and executive director of Feeding Our Future, was also charged in the case. Other defendants operated food sites under another sponsor organization identified in charging documents only as “Sponsor A.”
Previously filed documents from a lawsuit, search warrant affidavits, and a federal complaint filed in May 2022 show that “Sponsor A” is Partners in Quality Care, which is also known as Partners in Nutrition. The St. Paul-based nonprofit worked with food sites. Luger did not dispute the characterization of Partners in Quality Care as “Sponsor A” at a March news conference announcing additional charges in the case. But he declined to comment further.
No Partners in Quality Care employees have been charged in the case.
Education department under fire
Ron Kresha (R–Little Falls), the Republican lead on the House education finance committee, said he would like to see the state address recommendations from a recent report from the Office of the Legislative Auditor. That report found “pervasive noncompliance” in state agencies’ grant-management programs, though it did not mention Feeding Our Future. A separate Feeding Our Future report from the auditor’s office is expected this summer.
“We’ve had committee hearings where we pushed the department to come out with their solutions, as well as the governor, and I haven’t seen that yet,” Kresha said. “They have to fix it. They’re in charge.”
The Minnesota Department of Education’s handling of the federal food-aid funds came under fire last year in a series of Senate committee hearings. At the time, Republicans held the majority in the Senate.
In one hearing last April, then–Senator Roger Chamberlain (R–Lino Lakes) asked why the Department of Education approved Feeding Our Future to be a sponsor for food sites when it had “no financial history” before its approval in 2018. Daron Korte, an assistant commissioner with the Minnesota Department of Education, referred to the previous litigation from Partners in Nutrition that led to the 2017 Court of Appeals decision.
Korte also mentioned that at the time, Aimee Bock was working with Partners in Nutrition. She later left to lead Feeding Our Future, where she applied to sponsor the food programs. During Feeding Our Future’s initial process to become a sponsor, the organization was represented by the same attorney who had successfully represented Partners in Nutrition against the state in the 2017 court ruling, Korte said.
The proposed rules, in both House and Senate education omnibus bills, come in addition to a four-pronged plan Governor Tim Walz proposed in December for combating food-aid fraud. Walz’s plan includes establishing an Office of the Inspector General within the education department. That proposal is also included in both House and Senate education omnibus bills.