Records show meals program was ripe for fraud in Minnesota

The Minnesota Department of Education faced a big choice: continue to require the nonprofit organization Feeding Our Future to document the growing number of poor children it claimed to be feeding, or pay the organization and alert federal investigators to their suspicions of incorrect billing.

The ministry chose the easier route. Education officials now acknowledge that demanding numerous receipts and other documents could have enabled the state to end its relationship with the struggling nonprofit months earlier, before tens of millions of taxpayer dollars are spent reimbursing claims that federal investigators have now ruled fraudulent.

That wasn’t the department’s only missed opportunity in managing the more than $300 million program.

Federal audits obtained by the Star Tribune, court records and interviews show that vague rules and unresolved questions about liabilities have opened the meal program to potential fraud, with federal and state administrators and participants blaming themselves. each other.

The audits, usually done every three years, show the state Department of Education has been repeatedly criticized for its handling of the two meal programs the FBI alleges Feeding Our Future and some of its partners have exploited.

In 2012, for example, the department was criticized for approving a new sponsor without first visiting the site where meals were to be served. “In this particular case, the site ended up submitting fraudulent meal counts over $10,000,” federal regulators noted. If the Department of Education “clearly understood its oversight responsibilities, it might have been more vigilant and prevented fraudulent meal accounts”.

Minnesota fixed that problem, but the state continued to neglect its duties, records show. In the last state audit, in 2019, federal regulators documented 29 non-school program deficiencies throughout the year, compared to eight negative findings in 2012. Compliance audits were conducted by the U.S. Department of Agriculture, which funds meal programs. but leaves oversight to state agencies.

Former Department of Education officials say a chronic staffing shortage likely contributed to any theft of federal funds. Steve Dibb, who retired as deputy commissioner in 2016 after spending seven years with the department, said he was not surprised to read reports of suspected fraud in the meal program.

“They were doing a great job with too few people,” Dibb said. “It was going to catch up with you sooner or later… If you don’t have the budget, you’re not going to go out and watch.”

In January, FBI officials accused Feeding Our Future and some of its partners of stealing at least $48 million by being paid for hundreds of thousands of meals that were never served. So far, no one has been criminally charged with fraud in connection with the ongoing investigation. Aimee Bock, executive director of the now-defunct nonprofit, denied any wrongdoing.

State Sen. Roger Chamberlain, R-Lino Lakes, said the department’s poor oversight likely allowed Feeding Our Future and some of its partners to get away with what he calls the biggest fraud involving the federally funded meal program in its history.

“Why didn’t they try harder?” asked Chamberlain, Deputy Senate Majority Leader and chairman of the Senate Education Committee. “If you think something is wrong, why didn’t you go ahead and dig?”

Chamberlain is now proposing that lawmakers transfer oversight of the meal program to the Minnesota Department of Agriculture, saying the Department of Education has proven incapable.

The Education Department’s Nutrition Division has 52 federally funded employees who work with 2,000 meal program sponsors, who partner with more than 10,000 food sites across Minnesota. The ministry says it has added 11 people to divisions overseeing meal programs since 2012.

Department officials acknowledge that staffing was an issue at the start of the pandemic, when there was a huge increase in the number of meals provided by non-school sponsors such as Feeding Our Future. Commissioner Heather Mueller said the department did not hire additional staff, but instead redeployed 12 workers to process applications and expand monitoring efforts.

“We didn’t need more staff,” she said.

Mueller said the problem was the USDA’s lack of response to departmental concerns about Feeding Our Future. She said state officials repeatedly contacted the USDA after they became suspicious of the nonprofit’s “unexplainable growth” in July 2020. But no one took those information seriously, Mueller said, until the department approached the FBI in April 2021.

“Our … team contacted the USDA regional office saying this doesn’t feel right, this doesn’t look right, this doesn’t smell right,” Mueller said.

Mueller also said many federal rules governing the meal program are vague and difficult to enforce.

She said it became an issue with Feeding Our Future. After the nonprofit sued the Department of Education for blocking its expansion plans, a state judge said he believed federal rules allowed the department to search for thousands of bills and other documents showing what was really going on at the organization’s recovery sites. But Mueller said the department was not comfortable insisting on such recordings without explicit USDA permission.

“They wouldn’t,” Mueller said. “I do not know why.”

If the department had obtained those records, Mueller acknowledged, the state might have been able to terminate its contract with Feeding Our Future sooner. In total, Feeding Our Future and its partners raised $197 million in 2021, up from $3.4 million in 2019.

“It might not have reached the level that it did, if we could have had that information,” Mueller said.

The USDA has been repeatedly criticized by the US Government Accountability Office for its sloppy handling of the meal program, with more than $1 billion a year wasted on “improper payments” including fraud.

USDA officials declined to comment, citing “ongoing investigation.”

Vague federal rules

Former employees say the Education Department has long struggled with oversight of meal programs.

“It was really chaos when I got there,” said Crista Walsh, a former crew chief who left the meal program after three years in 2016. focus on that. It was pretty much ignored for a long time.”

Walsh said the vague federal rules were a big deal.

“You could ask two different people to interpret the rules and you’d get two different answers,” she said.

In several cases, the Department for Education was forced to withdraw when its interpretation of the rules proved to be too aggressive, records show.

In 2016, for example, the department tried to block Partners in Nutrition, a St. Paul nonprofit, from expanding its network of dining sites by claiming the group had failed to prove that was “financially viable”, even though one of its executives had secured a $1 million line of credit.

Partners in Nutrition took its case to the Minnesota Court of Appeals, which overturned the denial in 2017 after finding the Department of Education had imposed a “stricter standard” than that allowed by federal rules. The ministry later agreed to pay $450,000 to settle the lawsuit and approved Partners in Nutrition’s request to operate more foodservice sites.

The department recently moved to start Meal Program Partners In Nutrition after the FBI accused several of its meal suppliers of receiving $26 million in allegedly fraudulent payments. The organization itself has not been accused of wrongdoing by federal investigators and has appealed the proposed dismissal.

In most cases, however, federal regulators have faulted Minnesota for not doing enough to ensure sponsors follow the rules.

In the most recent audit, the USDA criticized the department for not properly reviewing budgets to ensure a sponsor was not charging “unauthorized costs.” The department was also flagged for not investigating suspicious changes in meal counts.

“It’s not like they’re getting better,” Chamberlain said. “There are always shortcomings, because it’s hard to be perfect. But the number of shortcomings has been steadily increasing and some of these shortcomings are much more serious than the previous ones.”

Education Department officials noted that audits show the state has corrected all the issues identified by federal regulators.

“They should find small things that give us the opportunity to keep growing because we’re a learning organization and our job is to constantly improve,” Mueller said.

Strengthen state rules

In fraud cases in other parts of the country, prosecutors have noted how vulnerable the meal program is to fraud, as great trust is placed in sponsors who are allowed to operate largely on the system of honor.

“The… program depends largely on its participants accurately declaring the number of children it must feed each day,” former U.S. Attorney for the Eastern District of New York, Richard Donoghue, wrote in a statement. a 2017 court filing. “Recipients are not required to file invoices for their purchases or itemize their expenses. Instead, the system relies on participants properly administering the programs.”

Feeding Our Future cited those rules when Minnesota regulators attempted to obtain backup documents for all of its early 2021 reimbursement claims. The organization’s attorney, Rhyddid Watkins, noted that the state was reviewing usually a sample of records once a year from about 10% of its suppliers, not all.

“MDE suddenly, for the first time, created a validation process,” Watkins told the court. “This is new. Never in the history of the MDE program has it ever refused to issue a payment until it has gone through a careful process to validate a claim…This is thousands and thousands of documents.”

The judge agreed the department couldn’t withhold those payments while it worked through the paperwork, but said federal regulations allow the state to place “additional conditions” on how it verifies the payments. dubious claims.

The Department of Education dropped its claims for validation of the records after the judge indicated he would soon order the payment of $20 million in disputed claims.

Ryan H. Bowman