Discussions About State Grant Oversight Shaping Up at Minnesota Legislature

According to the Office of the Legislative Auditor (OLA) there are systemic issues related to Minnesota’s oversight of state-funded grants. A report on those issues, alongside recommendations, was presented at a joint meeting of the House Education Finance and Children and Families Finance and Policy committees in early February.

“The report was prompted, in some measure, by an incident involving a federal grant program,” said Chair Dave Pinto (DFL– 64B), referring to the local Feeding Our Future scandal involving the Department of Education. “In the course of that, the Office of the Legislative Auditor took a look at a separate set of grant programs, in terms of how they’re administered and how that works.”

The report specifically looked at state-funded grants — grants appropriated by the Minnesota legislature and awarded to state agencies who are responsible for distributing and overseeing grants to a variety of organizations. The report focuses on nonprofit organizations and three different types of grants: competitive grants, sole source grants (only one type of organization is eligible for a grant), and legislative leaning grants (a grantee is named in law). It includes funds that are used for teacher recruitment, for youth intervention, violence interruption, supporting community efforts via state agency, and more.

The Details

In 2022, state agencies distributed approximately $558 million in grant funding. Since 2018, 2,400 nonprofit organizations received funding with an average grant of $68,000, peaking during the pandemic crisis.

  • 2021: $616 million
  • 2020: $593 million
  • 2019: $411 million
  • 2018: $389 million

Judy Randall, the Legislative Auditor, spoke at the finance committees meeting and answered legislator’s questions. Randall was named Legislative Auditor in 2021 and her office was tasked with the report by the Legislative Audit Commission. The Office of the Legislative Auditor has conducted numerous audits and evaluations as part of its role in state governance.

“We have consistently found the [state] agencies have not complied with state’s grant management policies,” said Randall. “The evaluation we’re discussing today goes a step further than those other audits and evaluations.”

The report focuses on the Minnesota Department of Education and the Minnesota Department of Public Safety, and it includes recommendations for improving oversight of state-funded grants for both departments as well as the Department of Administration’s Office of Grant Management and legislators.

“Grants to nonprofit organizations are a significant investment by the state and we think it is time for a statewide and a state-level response to improve grant oversight. We need to ensure that these grants are used effectively and for the purpose for which you intend them to be used,” said Randall.

Jodi Munson Rodriguez, a Deputy Legislative Auditor and the audit manager, also spoke. She shared that the evaluation focused on two primary questions:

  1. How comprehensive are the state’s grant management policies?
  2. How well are state agencies complying with these policies?

According to Munson Rodrigues, Minnesota has policies “that establish a number of important practices, important for effective grant management,” but the policies lack the necessary detail for actual implementation by state agencies.

Munson Rodriguez also shared that OLA found “pervasive noncompliance” with the state’s grant management policies, including issues with conflict of interest documentation and resolution, pre-award financial reviews, required progress report collection, monitoring visits, and closeout evaluations. . 

“We believe this is [because] statutes provide little authority to enforce the agencies compliance with them,” said Munson Rodriguez.

The report covers some of the prefigurative actions that may have led to the systemic issues in grant oversight. The report specifically discusses state agency capacity and variances in legislative support for grant funding management, training, and variances in use of grant management tools.

Munson Rodriguez shared recommendations for two state agencies, the Department of Administration, and the Minnesota State Legislature.

“Unfortunately, we found that the legislature just doesn’t have very good data or information available to them statewide on grants,” said Munson Rodriguez.

The report makes several recommendations, including that the Department of Administration Office of Grant Management provide required trainings for state agency staff and that the legislature direct the Office of Grant Management to develop standards for grant management that would apply to all state agencies.

Shaping Budget Discussions

The OLA report has been the topic of consternation during the 2023 legislative session, as GOP legislators question grant management and distribution processes that provides grant money to organizations and state agencies.

For example, a recent meeting of House Ways and Means discussed House File 444, the Pathway Home Act, with Representative Heather Keeler (DFL—District 4A). The OLA report was a major topic of discussion as the bill, like much legislation, includes a grant component.

Following the presentation, legislators heard from Willie Jett, Commissioner of the Minnesota Department of Education, who began his role on January 2, 2023. He shared that one of the first meetings he had in his new role was in response to the drafted OLA report. Jett was joined by other members of his team, including MDE Chief Financial Officer Denise Anderson, and discussed the efforts of MDE to respond to the issues named in the report.

“We are focusing our activities in three primary areas: policies and procedures, technology systems, and training,” said Anderson. Anderson also noted that the recently released Walz-Flanagan budget includes funding for greater government oversight of state agencies and programs.

Chair Cheryl Youakin (DFL–District 46B) invited legislators to ask questions and to respond to the presentations.

“I’m at a loss of words and that doesn’t come easy. But a couple that stick to mind are ‘pervasive noncompliance.’ Having been a business owner — and having seen long-term care settings and assisted living get fined millions of dollars for noncompliance for care plans, for state-mandated guidelines for COVID — it seems shocking to me that we are delivering grant money in a noncompliant way with zero accountability,” said Representative Natalie Zeleznikar (GOP–District 3B).

Zeleznikar said that organizations not in compliance with grant funding requirements should be fined by the State of Minnesota and be made not eligible for future funding.

Other legislators asked clarifying questions and shared their frustrations.

The report was released February 2. Find details here.

The OLA presentation and legislative discussion can be watched here.