HF 1

3rd Engrossment - 94th Legislature (2025 - 2026)

Posted on 02/26/2025 12:17 p.m.

A bill for an act
relating to state government; establishing an Office of Inspector General; providing
powers and duties; providing enhanced grant oversight; prohibiting retaliation;
transferring or repealing existing executive Offices of Inspector General; providing
detection and prevention of fraud; making conforming changes; requiring reports;
appropriating money; amending Minnesota Statutes 2024, sections 3.855,
subdivision 3; 3.97, subdivision 1, by adding subdivisions; 3.971, subdivisions 1,
9; 16B.97, subdivisions 2, 4; 16B.98, subdivisions 4, 8, 14; 16B.991, subdivision
1; 142B.53; 245A.24; 268.19, subdivision 1; 268B.30; 609.456, subdivision 2;
proposing coding for new law in Minnesota Statutes, chapters 3; 15; repealing
Minnesota Statutes 2024, sections 13.321, subdivision 12; 127A.21.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

OFFICE OF THE INSPECTOR GENERAL

Section 1.

Minnesota Statutes 2024, section 3.97, subdivision 1, is amended to read:

Subdivision 1.

Policy.

Continuous legislative review of the spending of public funds
and financing at all levels of government is required in the public interest to enable the
enactment of appropriate legislation. new text begin Fraud, misuse, and other unlawful uses of public funds
are unacceptable and must be prevented. If fraud, misuse, or other unlawful use of public
funds occurs, it must be promptly identified and prosecuted to the fullest extent of the law.
new text end

Sec. 2.

Minnesota Statutes 2024, section 3.97, is amended by adding a subdivision to read:

new text begin Subd. 3c. new text end

new text begin Complementary. new text end

new text begin The commission must ensure that the work of the inspector
general is complementary to, and not duplicative of, that of the legislative auditor.
new text end

Sec. 3.

Minnesota Statutes 2024, section 3.97, is amended by adding a subdivision to read:

new text begin Subd. 3d. new text end

new text begin Executive secretaries. new text end

new text begin The legislative auditor and the inspector general are
the executive secretaries of the commission.
new text end

Sec. 4.

Minnesota Statutes 2024, section 3.971, subdivision 1, is amended to read:

Subdivision 1.

Appointment and term.

deleted text begin The legislative auditor is the executive secretary
of the commission. deleted text end The legislative auditor shall be appointed by the commission for a
six-year term and serve in the unclassified service. When in office, the legislative auditor
may not at any time hold any other public office. The legislative auditor may not be removed
from office before the expiration of the term of service except for cause after public hearing.

Sec. 5.

Minnesota Statutes 2024, section 3.971, subdivision 9, is amended to read:

Subd. 9.

Obligation to notify the legislative auditor.

The chief executive, financial,
or information officers of an organization subject to audit under this section must promptly
notify the legislative auditor when the officer obtains information indicating that new text begin (1) new text end public
money or other public resources may have been used for an unlawful purpose, or deleted text begin when the
officer obtains information indicating that deleted text end new text begin (2) new text end government data classified by chapter 13 as
not public may have been accessed by or provided to a person without lawful authorization.
new text begin The legislative auditor must notify and coordinate with the inspector general when the
legislative auditor receives a credible notification under clause (1) that is within the inspector
general's authority. new text end As necessary, the legislative auditor shall coordinate an investigation
of the allegation with appropriate law enforcement officials.

Sec. 6.

new text begin [3.99] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Application. new text end

new text begin For purposes of sections 3.991 to 3.998, the following terms
have the meanings given.
new text end

new text begin Subd. 2. new text end

new text begin Agency. new text end

new text begin "Agency" means any entity subject to audit under section 3.971,
subdivision 6, or section 3.972, subdivision 2.
new text end

new text begin Subd. 3. new text end

new text begin Fraud. new text end

new text begin "Fraud" means an intentional or deliberate act to deprive another of
property or money or to acquire property or money by deception or other unfair means.
Fraud includes intentionally submitting false information to the state, a political subdivision,
or a private entity under contract with the state or a political subdivision for the purpose of
obtaining a greater compensation or benefit than that to which the person is legally entitled.
Fraud also includes failure to correct errors in the maintenance of records in a timely manner
after a request by the state.
new text end

new text begin Subd. 4. new text end

new text begin Inspector general. new text end

new text begin "Inspector general" means the person appointed under
section 3.991 or an employee of the office designated by the inspector general.
new text end

new text begin Subd. 5. new text end

new text begin Investigation. new text end

new text begin "Investigation" means a proceeding or inquiry by the office
concerning a provider or recipient of state-funded services.
new text end

new text begin Subd. 6. new text end

new text begin Office. new text end

new text begin "Office" means the Office of the Inspector General.
new text end

new text begin Subd. 7. new text end

new text begin Program. new text end

new text begin "Program" or "state program" means any program fully or partially
administered or funded by the state.
new text end

new text begin Subd. 8. new text end

new text begin Recipient of state funds. new text end

new text begin "Recipient of state funds" means any entity or person,
including associated persons, that receives, disburses, or has custody of funds or other
resources transferred or disbursed under a program. Recipient of state funds includes but
is not limited to a private person or entity currently or formerly under contract with the state
to provide benefits, goods, or services to eligible recipients.
new text end

Sec. 7.

new text begin [3.991] OFFICE OF THE INSPECTOR GENERAL.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment. new text end

new text begin The Office of the Inspector General is established in the
legislative branch under the direction of the inspector general. The inspector general reports
to the Legislative Audit Commission but may independently initiate investigations and
allocate the resources of the office to effectively achieve the purpose in subdivision 2.
new text end

new text begin Subd. 2. new text end

new text begin Purpose. new text end

new text begin The inspector general must investigate and combat suspected fraud,
misuse, and other unlawful uses of public funds in state government with a focus on the
providers and recipients of state-funded services.
new text end

new text begin Subd. 3. new text end

new text begin Inspector general appointment; term. new text end

new text begin (a) The Legislative Audit Commission
must appoint an inspector general to serve in the unclassified service for a six-year term.
When in office, the inspector general may not at any time hold another public office. The
commission may not remove an inspector general from office before the expiration of the
term of service except for cause after public hearing.
new text end

new text begin Subd. 4. new text end

new text begin Qualifications. new text end

new text begin The commission must select an inspector general without regard
to political affiliation and on the basis of outstanding professional qualifications and
demonstrated integrity, leadership, and ability in accounting, auditing, financial analysis,
law, management analysis, public administration, investigation, criminal justice, or a related
field. The inspector general must hold at the time of appointment, or be required by the
commission to obtain within a time certain after appointment, certification from the
Association of Inspectors General.
new text end

new text begin Subd. 5. new text end

new text begin Conflicts of interest; code of ethics. new text end

new text begin The inspector general, deputy inspector
general, assistant inspectors general, and all other employees of the office are public officials
for purposes of the conflict of interest and statement of economic disclosure requirements
in chapter 10A and are subject to the code of ethics in section 43A.38 where applicable.
new text end

new text begin Subd. 6. new text end

new text begin Staff; compensation. new text end

new text begin (a) The inspector general must appoint a deputy inspector
general, with the approval of the commission, for a term coterminous with the inspector
general's term. The deputy inspector general may be removed by the commission or the
inspector general before the expiration of the deputy's term only for cause. The inspector
general and deputy inspector general may each appoint an administrative support specialist
to serve at pleasure. The deputy inspector general may perform and exercise the powers,
duties, and responsibilities imposed by law on the inspector general when authorized by
the inspector general.
new text end

new text begin (b) The inspector general must hire assistant inspectors general and other staff as required,
in the inspector general's estimation, to administer sections 3.991 to 3.998 and other relevant
law.
new text end

new text begin (c) The salaries and benefits of the inspector general, deputy inspector general,
administrative support specialists, assistant inspectors general, and other staff must be
determined by a compensation plan approved by the Legislative Coordinating Commission.
new text end

new text begin (d) All employees of the Office of the Inspector General serve in the unclassified service.
new text end

new text begin (e) Notwithstanding section 43A.32, subdivision 3, or any other law to the contrary, an
employee of the Office of the Inspector General is prohibited from being a candidate for a
partisan elected public office.
new text end

Sec. 8.

new text begin [3.992] DUTIES.
new text end

new text begin The inspector general must:
new text end

new text begin (1) provide general direction and leadership for the office and its staff;
new text end

new text begin (2) embed assistant inspectors general, and other staff as determined by the inspector
general, within the Departments of Children, Youth, and Families; Corrections; Education;
Employment and Economic Development; Health; Human Services; and Labor and Industry;
new text end

new text begin (3) develop and maintain a website and telephone hotline for state agency staff and the
public to report suspected fraud, misuse, or other unlawful use of public funds in state
programs, and to do so anonymously if they so choose;
new text end

new text begin (4) establish policies and procedures for evaluating and consistently responding to each
tip received under clause (3);
new text end

new text begin (5) notify and coordinate with the legislative auditor when the inspector general receives
a credible report of suspected fraud, misuse, or other unlawful use of public funds that is
within the legislative auditor's authority;
new text end

new text begin (6) establish and maintain policies and procedures for conducting investigations;
new text end

new text begin (7) report suspected fraud, misuse, or other unlawful use of public funds to the appropriate
law enforcement entity and cooperate with law enforcement to assist any investigation and
subsequent civil or criminal prosecution;
new text end

new text begin (8) perform enhanced legislative oversight of state grantmaking as provided in section
3.994; and
new text end

new text begin (9) exercise all other powers reasonably necessary to implement and administer sections
3.991 to 3.998 and other applicable law.
new text end

new text begin The inspector general must submit policies to the Legislative Audit Commission for review
at least 30 days prior to adoption or substantial revision. Procedures developed by the
inspector general under clauses (4) and (6) are nonpublic data.
new text end

Sec. 9.

new text begin [3.993] POWERS.
new text end

new text begin Notwithstanding any law to the contrary, the inspector general may exercise the following
powers as necessary to conduct investigations and achieve the purpose of sections 3.991 to
3.998:
new text end

new text begin (1) require the commissioner or other chief executive officer of an agency to provide
full and unrestricted access to all government data, regardless of classification, created and
maintained by the agency;
new text end

new text begin (2) require a recipient of state funds to provide full and unrestricted access to all records,
reports, plans, contracts, memoranda, correspondence, and other information created or
maintained by the recipient;
new text end

new text begin (3) require a recipient of state funds to provide the inspector general, upon presentation
of official credentials, access at reasonable times and without delay to sites and facilities
owned or operated by the recipient;
new text end

new text begin (4) subpoena witnesses, administer oaths or affirmations, take testimony, and compel
the production of the data specified under clauses (1) and (2) as the inspector general deems
necessary;
new text end

new text begin (5) recommend that the commissioner of administration for state grants, or the
commissioner of management and budget for all other state funds, impose, in consultation
with law enforcement, appropriate temporary sanctions including the withholding of payment
to a recipient of state funds, if:
new text end

new text begin (i) the inspector general determines there is credible indicia of fraud, misuse, or other
unlawful use of public funds by the recipient;
new text end

new text begin (ii) there was a criminal, civil, or administrative adjudication of fraud, misuse, or other
unlawful use of public funds against the recipient in Minnesota or in another state or
jurisdiction;
new text end

new text begin (iii) the recipient was receiving funds under any contract or registered in any program
administered by another Minnesota state agency, a government agency in another state, or
a federal agency, and was under investigation or excluded from that contract or program
for reasons credibly indicating fraud, misuse, or other unlawful use of public funds by the
recipient; or
new text end

new text begin (iv) the recipient demonstrates a pattern of noncompliance with an investigation.
new text end

new text begin When the inspector general makes a recommendation under this clause, the inspector general
must immediately notify the Legislative Audit Commission;
new text end

new text begin (6) require state employees to fully cooperate with an investigation of suspected fraud,
misuse, or other unlawful use of public funds;
new text end

new text begin (7) recommend actions to be taken by an agency to prevent fraud, misuse, and other
unlawful uses of public funds;
new text end

new text begin (8) require agencies to provide suitable office space and facilities access for inspector
general staff embedded within the agency; and
new text end

new text begin (9) monitor the implementation of requirements and recommendations issued by the
office.
new text end

Sec. 10.

new text begin [3.994] ENHANCED OVERSIGHT OF STATE GRANTMAKING.
new text end

new text begin The inspector general must provide enhanced legislative oversight of state grantmaking,
including but not limited to:
new text end

new text begin (1) monitoring the commissioner of administration's development and implementation
of policies under sections 16B.97 to 16B.991, and providing formal recommendations to
the commissioner of administration and the Legislative Audit Commission;
new text end

new text begin (2) monitoring the commissioner of administration's suspension or debarment of grantees
under section 16B.97, subdivision 3, clause (6), and recommending to the commissioner
the suspension or debarment of specific grantees as necessary, in the inspector general's
judgment, to prevent or minimize fraud, misuse, and other unlawful uses of public funds.
When the inspector general makes a recommendation to the commissioner of administration
under this clause, the inspector general must immediately report to the Legislative Audit
Commission;
new text end

new text begin (3) monitoring the commissioner of administration's receipt and disposition of comments
under section 16B.97, subdivision 4, clause (6), concerning alleged state agency violations
of state grants management policies and fraud, misuse, or other unlawful use of state funds
in grant programs; and
new text end

new text begin (4) monitoring state agency compliance with state grantmaking laws and policies,
including but not limited to the site visit and progress report requirements under section
16B.97, subdivision 4, clause (11).
new text end

Sec. 11.

new text begin [3.995] DATA PRACTICES.
new text end

new text begin (a) The inspector general has access to all government data regardless of classification.
new text end

new text begin (b) It is not a violation of rights conferred by chapter 13 or any other statute related to
the confidentiality of government data for an agency to provide data or information to the
inspector general.
new text end

new text begin (c) The inspector general is subject to the Government Data Practices Act, chapter 13,
and must protect from unlawful disclosure data classified as not public. Data collected,
created, received, or maintained by the inspector general relating to an investigation are
subject to section 13.39.
new text end

new text begin (d) If data provided by the inspector general to the Legislative Audit Commission is
disseminated by the commission or its members or agents in violation of section 13.05,
subdivision 4, the commission is subject to liability under section 13.08, subdivisions 1 and
3. Members of the commission have access to not public data that is collected or used by
the inspector general only as authorized by resolution of the commission. The commission
may not authorize its members to have access to private or confidential data on individuals
collected or used in connection with the collection of any tax.
new text end

Sec. 12.

new text begin [3.996] RETALIATION PROHIBITED.
new text end

new text begin An employee or other individual who discloses information to an agency or the inspector
general about fraud, misuse, or other unlawful use of public funds in state programs is
protected under section 181.932, governing disclosure of information by employees.
new text end

Sec. 13.

new text begin [3.997] INTERFERENCE PROHIBITED.
new text end

new text begin No state employee may interfere with or obstruct an investigation conducted pursuant
to sections 3.991 to 3.998.
new text end

Sec. 14.

new text begin [3.998] REPORTING REQUIRED.
new text end

new text begin When the inspector general documents the existence of suspected fraud, misuse, or other
unlawful use of public funds in an agency or program administered by an agency, the
inspector general must quantify the amount of suspected fraud, misuse, and other unlawful
use of public funds and report this amount to the Legislative Audit Commission and the
chairs and ranking minority members of the legislative committees with jurisdiction over
the agency's operating budget.
new text end

Sec. 15.

new text begin [15.442] DETECTION AND PREVENTION OF FRAUD AND OTHER
MISUSES OF PUBLIC FUNDS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings given.
new text end

new text begin (b) "Agency" has the meaning given in section 3.99.
new text end

new text begin (c) "Obligated officer" means an agency's:
new text end

new text begin (1) chief executive officer;
new text end

new text begin (2) deputy and assistant chief executive officers;
new text end

new text begin (3) chief administrative, chief financial, chief information, and chief investigative officers;
new text end

new text begin (4) heads of divisions, bureaus, departments, institutes, or other such organizational
units; and
new text end

new text begin (5) where applicable, board chair.
new text end

new text begin Subd. 2. new text end

new text begin Suspected fraud or other misuse. new text end

new text begin Notwithstanding any law to the contrary,
if an obligated officer finds or receives credible indicia of fraud, misuse, or other unlawful
use of public funds in a grant program or other program administered by the agency, the
agency must:
new text end

new text begin (1) report to the appropriate law enforcement entity;
new text end

new text begin (2) report to the inspector general and the legislative auditor under section 609.456;
new text end

new text begin (3) fully cooperate with law enforcement and the inspector general, including but not
limited to assisting in any investigation and subsequent civil or criminal prosecution; and
new text end

new text begin (4) if approved or directed by law enforcement, stop payment, increase oversight, or
take other action necessary to prevent further suspected fraud or misuse of public funds in
the program.
new text end

new text begin Subd. 3. new text end

new text begin Identification of fraud reporting tools. new text end

new text begin (a) The commissioner or other chief
executive officer of each agency must prominently highlight on the agency's website the
fraud reporting tools administered by the Office of the Inspector General and the Office of
the Legislative Auditor under chapter 3.
new text end

new text begin (b) As part of any grant agreement between the state and a nonprofit organization, the
agreement must require the nonprofit organization to prominently highlight on the
organization's website the fraud reporting tools administered by the Office of the Inspector
General and the Office of the Legislative Auditor under chapter 3. The state agency
administering the grant must regularly confirm and document the organization's compliance
with the requirement under this paragraph for the life of the grant agreement.
new text end

Sec. 16.

Minnesota Statutes 2024, section 609.456, subdivision 2, is amended to read:

Subd. 2.

Legislative auditor new text begin and inspector general new text end .

Whenever an employee or officer
of the state, University of Minnesota, or other organization listed in section 3.971, subdivision
6, discovers evidence of new text begin fraud, new text end theft, embezzlement, or new text begin other new text end unlawful use of public funds
or property, the employee or officer shall deleted text begin , except when to do so would knowingly impede
or otherwise interfere with an ongoing criminal investigation, deleted text end promptly report in writing to
the legislative auditor new text begin and inspector general new text end a detailed description of the alleged incident
or incidents.

Sec. 17. new text begin APPROPRIATION.
new text end

new text begin $....... in fiscal year 2026 and $....... in fiscal year 2027 are appropriated from the general
fund to the inspector general for purposes of this act.
new text end

Sec. 18. new text begin APPROPRIATION.
new text end

new text begin $....... in fiscal year 2026 and $....... in fiscal year 2027 are appropriated from the general
fund to the legislative auditor. The amount each year is in addition to the legislative auditor's
base general fund budget.
new text end

Sec. 19. new text begin EFFECTIVE DATE.
new text end

new text begin This article is effective July 1, 2025.
new text end

ARTICLE 2

CONFORMING ITEMS AND REPEALERS

Section 1.

Minnesota Statutes 2024, section 3.855, subdivision 3, is amended to read:

Subd. 3.

Other salary and compensation deleted text begin plan deleted text end new text begin plans new text end .

The commission shall review
and approve or reject the plan for compensation, terms, and conditions of employment of
classified employees in the office of the legislative auditor under section 3.971, subdivision
2 new text begin , and a plan for compensation, terms, and conditions of employment for employees of the
Office of the Inspector General under section 3.991, subdivision 5 new text end .

Sec. 2.

Minnesota Statutes 2024, section 16B.97, subdivision 2, is amended to read:

Subd. 2.

Grants governance.

The commissioner shall provide leadership and direction
for policy related to grants management in Minnesota in order to foster more consistent,
streamlined interaction between executive agencies, funders, and grantees that will enhance
access to grant opportunities and information new text begin , prevent fraud, misuse, and other unlawful
uses of public funds, new text end and lead to greater program accountability and transparency. The
commissioner has the duties and powers stated in this section. Executive agencies shall
fully cooperate with the commissioner in the creation, management, and oversight of state
grants and must do what the commissioner requires under this section. The commissioner
may adopt rules to carry out grants governance, oversight, and management.

Sec. 3.

Minnesota Statutes 2024, section 16B.97, subdivision 4, is amended to read:

Subd. 4.

Duties.

(a) The commissioner shall:

(1) create general grants management policies and procedures that are applicable to all
executive agencies. The commissioner may approve exceptions to these policies and
procedures for particular grant programs new text begin , however the commissioner must not approve an
exception to the requirements under clause (11) for any grant over $500,000 new text end . Exceptions
shall expire or be renewed after five years. new text begin The commissioner must report each approved
exception to the inspector general and the chairs and ranking minority members of the
legislative committees with jurisdiction over the agency. If a grant is suspended under
section 16B.991, subdivision 1, the commissioner must revoke for at least 12 months any
approved exception to the requirements under clause (11) for that particular grant program,
but the commissioner's revocation only applies to any grant over $50,000. new text end Executive agencies
shall retain management of individual grants programs;

(2) provide a central point of contact concerning statewide grants management policies
and procedures;

(3) serve as a resource to executive agencies in such areas as training, evaluation,
collaboration, and best practices in grants management;

(4) ensure grants management needs are considered in the development, upgrade, and
use of statewide administrative systems and leverage existing technology wherever possible;

(5) oversee and approve future professional and technical service contracts and other
information technology spending related to executive agency grants management systems
and activities;

(6) provide a central point of contact for comments about executive agencies violating
statewide grants governance policies and about fraud new text begin , misuse, new text end and deleted text begin waste deleted text end new text begin other unlawful
uses of public funds new text end in grants processes;

(7) forward received comments to the appropriate agency for further action, and may
follow up as necessary;

(8) provide a single listing of all available executive agency competitive grant
opportunities and resulting grant recipients;

(9) selectively review development and implementation of executive agency grants,
policies, and practices; deleted text begin and
deleted text end

(10) selectively review executive agency compliance with best practices deleted text begin . deleted text end new text begin ; and
new text end

new text begin (11) require executive agencies to:
new text end

new text begin (i) conduct at least one in-person, unannounced monitoring visit before final payment
is made for any grant over $50,000 and at least annual in-person, unannounced monitoring
visits for any grant over $250,000; and
new text end

new text begin (ii) withhold funds from any grantee that does not submit a progress report required
under the grant agreement until the grantee submits a satisfactory report, unless the grantee's
inability to submit a progress report is caused by the executive agency, including but not
limited to a malfunction or failure of the executive agency's grant portal.
new text end

(b) The commissioner may determine that it is cost-effective for agencies to develop
and use shared grants management technology systems. This system would be governed
under section 16E.01, subdivision 3, paragraph (b).

Sec. 4.

Minnesota Statutes 2024, section 16B.98, subdivision 4, is amended to read:

Subd. 4.

Reporting of violations.

A state employee who discovers evidence of violation
of laws or rules governing grants deleted text begin is encouraged to deleted text end new text begin must new text end report the violation or suspected
violation to the employee's supervisor, the commissioner or the commissioner's designee,
new text begin the inspector general, new text end or the legislative auditor. new text begin If the state employee notifies the employee's
supervisor, the commissioner, or the commissioner's designee, then the supervisor,
commissioner, or commissioner's designee must immediately notify the inspector general
and the legislative auditor. new text end The deleted text begin legislative auditor deleted text end new text begin inspector general new text end shall report to the
Legislative Audit Commission if there are multiple complaints about the same agency. deleted text begin The
auditor's report to the Legislative Audit Commission under this section must disclose only
the number and type of violations alleged. deleted text end An employee making a good faith report under
this section has the protections provided for under section 181.932, prohibiting the employer
from discriminating against the employee.

Sec. 5.

Minnesota Statutes 2024, section 16B.98, subdivision 8, is amended to read:

Subd. 8.

Audit.

(a) A grant agreement made by an executive agency must include an
audit clause that provides that the books, records, documents, and accounting procedures
and practices of the grantee or other party that are relevant to the grant or transaction are
subject to examination by the commissioner, the granting agency new text begin , the inspector general, new text end
and either the legislative auditor or the state auditor, as appropriate, for a minimum of six
years from the grant agreement end date, receipt and approval of all final reports, or the
required period of time to satisfy all state and program retention requirements, whichever
is later. If a grant agreement does not include an express audit clause, the audit authority
under this subdivision is implied.

(b) If the granting agency is a local unit of government, and the governing body of the
local unit of government requests that the state auditor examine the books, records,
documents, and accounting procedures and practices of the grantee or other party according
to this subdivision, the granting agency shall be liable for the cost of the examination. If
the granting agency is a local unit of government, and the grantee or other party requests
that the state auditor examine all books, records, documents, and accounting procedures
and practices related to the grant, the grantee or other party that requested the examination
shall be liable for the cost of the examination.

Sec. 6.

Minnesota Statutes 2024, section 16B.98, subdivision 14, is amended to read:

Subd. 14.

Administrative costs.

Unless amounts are otherwise appropriated for
administrative costs, a state agency may retain up to deleted text begin five deleted text end new text begin four new text end percent of the amount
appropriated to the agency for grants enacted by the legislature and formula grants and up
to deleted text begin ten deleted text end new text begin nine new text end percent for competitively awarded grants. deleted text begin This subdivision applies to
appropriations made for new grant programs enacted on or after July 1, 2023. deleted text end new text begin The state
agency must transfer one percent of the amount appropriated to the agency for grants to the
inspector general established under section 3.991. new text end This subdivision does not apply to grants
funded with an appropriation of proceeds from the sale of state general obligation bonds.

Sec. 7.

Minnesota Statutes 2024, section 16B.991, subdivision 1, is amended to read:

Subdivision 1.

Criminal new text begin charge or new text end conviction.

Each grant agreement subject to sections
16B.97 and 16B.98 must provide that the agreement will immediately be deleted text begin terminated deleted text end new text begin
suspended new text end if the recipient is deleted text begin convicted of deleted text end new text begin charged with new text end a criminal offense relating to a state
grant agreement new text begin and terminated if the recipient is convicted new text end .

Sec. 8.

Minnesota Statutes 2024, section 142B.53, is amended to read:

142B.53 MANDATORY REPORTING.

Any individual engaging in licensing functions and activities under this chapter, including
authorities delegated under section 142B.30, must immediately report any suspected fraud
to county children, youth, and families investigators deleted text begin or deleted text end new text begin and new text end the deleted text begin Department of Children,
Youth, and Families deleted text end Office of new text begin the new text end Inspector General.

Sec. 9.

Minnesota Statutes 2024, section 245A.24, is amended to read:

245A.24 MANDATORY REPORTING.

Any individual engaging in licensing functions and activities under this chapter, including
authorities delegated under section 245A.16, must immediately report any suspected fraud
to county human services investigators or the deleted text begin Department of Human Services deleted text end Office of new text begin the new text end
Inspector General.

Sec. 10.

Minnesota Statutes 2024, section 268.19, subdivision 1, is amended to read:

Subdivision 1.

Use of data.

(a) Except as provided by this section, data gathered from
any person under the administration of the Minnesota Unemployment Insurance Law are
private data on individuals or nonpublic data not on individuals as defined in section 13.02,
subdivisions 9 and 12, and may not be disclosed except according to a district court order
or section 13.05. A subpoena is not considered a district court order. These data may be
disseminated to and used by the following agencies without the consent of the subject of
the data:

(1) state and federal agencies specifically authorized access to the data by state or federal
law;

(2) any agency of any other state or any federal agency charged with the administration
of an unemployment insurance program;

(3) any agency responsible for the maintenance of a system of public employment offices
for the purpose of assisting individuals in obtaining employment;

(4) the public authority responsible for child support in Minnesota or any other state in
accordance with section 518A.83;

(5) human rights agencies within Minnesota that have enforcement powers;

(6) the Department of Revenue to the extent necessary for its duties under Minnesota
laws;

(7) public and private agencies responsible for administering publicly financed assistance
programs for the purpose of monitoring the eligibility of the program's recipients;

(8) the Department of Labor and Industry and the Commerce Fraud Bureau in the
Department of Commerce for uses consistent with the administration of their duties under
Minnesota law;

(9) the Department of Human Services deleted text begin and deleted text end new text begin , new text end the Office of new text begin the new text end Inspector General new text begin , new text end and deleted text begin its
agents within the Department of Human Services, including deleted text end county fraud investigators, for
investigations related to recipient or provider fraud and employees of providers when the
provider is suspected of committing public assistance fraud;

(10) the Department of Human Services for the purpose of evaluating medical assistance
services and supporting program improvement;

(11) local and state welfare agencies for monitoring the eligibility of the data subject
for assistance programs, or for any employment or training program administered by those
agencies, whether alone, in combination with another welfare agency, or in conjunction
with the department or to monitor and evaluate the statewide Minnesota family investment
program and other cash assistance programs, the Supplemental Nutrition Assistance Program,
and the Supplemental Nutrition Assistance Program Employment and Training program by
providing data on recipients and former recipients of Supplemental Nutrition Assistance
Program (SNAP) benefits, cash assistance under chapter 256, 256D, 256J, or 256K, child
care assistance under chapter 142E, or medical programs under chapter 256B or 256L or
formerly codified under chapter 256D;

(12) local and state welfare agencies for the purpose of identifying employment, wages,
and other information to assist in the collection of an overpayment debt in an assistance
program;

(13) local, state, and federal law enforcement agencies for the purpose of ascertaining
the last known address and employment location of an individual who is the subject of a
criminal investigation;

(14) the United States Immigration and Customs Enforcement has access to data on
specific individuals and specific employers provided the specific individual or specific
employer is the subject of an investigation by that agency;

(15) the Department of Health for the purposes of epidemiologic investigations;

(16) the Department of Corrections for the purposes of case planning and internal research
for preprobation, probation, and postprobation employment tracking of offenders sentenced
to probation and preconfinement and postconfinement employment tracking of committed
offenders;

(17) the state auditor to the extent necessary to conduct audits of job opportunity building
zones as required under section 469.3201;

(18) the Office of Higher Education for purposes of supporting program improvement,
system evaluation, and research initiatives including the Statewide Longitudinal Education
Data System; and

(19) the Family and Medical Benefits Division of the Department of Employment and
Economic Development to be used as necessary to administer chapter 268B.

(b) Data on individuals and employers that are collected, maintained, or used by the
department in an investigation under section 268.182 are confidential as to data on individuals
and protected nonpublic data not on individuals as defined in section 13.02, subdivisions 3
and 13, and must not be disclosed except under statute or district court order or to a party
named in a criminal proceeding, administrative or judicial, for preparation of a defense.

(c) Data gathered by the department in the administration of the Minnesota unemployment
insurance program must not be made the subject or the basis for any suit in any civil
proceedings, administrative or judicial, unless the action is initiated by the department.

Sec. 11.

Minnesota Statutes 2024, section 268B.30, is amended to read:

268B.30 DATA PRIVACY.

(a) Except as provided by this section, data collected, created, or maintained under this
chapter are private data on individuals or nonpublic data not on individuals as defined in
section 13.02, subdivisions 9 and 12, and must not be disclosed except according to a district
court order or section 13.05. A subpoena is not considered a district court order.

(b) Data classified under paragraph (a) may be disseminated to and used by the following
without the consent of the subject of the data:

(1) state and federal agencies specifically authorized access to the data by state or federal
law;

(2) the unemployment insurance division, to the extent necessary to administer the
programs established under this chapter and chapter 268;

(3) employers, to the extent necessary to support adjudication of application requests
and to support the employer's administration of a leave of absence;

(4) health care providers, to the extent necessary to support verification of health care
conditions and qualifying events;

(5) the public authority responsible for child support in Minnesota or any other state in
accordance with section 518A.83;

(6) human rights agencies within Minnesota that have enforcement powers;

(7) the Department of Revenue, to the extent necessary for its duties under Minnesota
laws;

(8) public and private agencies responsible for administering publicly financed assistance
programs for the purpose of monitoring the eligibility of the program's recipients;

(9) the Department of Labor and Industry and the Commerce Fraud Bureau in the
Department of Commerce for uses consistent with the administration of their duties under
Minnesota law;

(10) the Department of Human Services deleted text begin and deleted text end new text begin , new text end the Office of new text begin the new text end Inspector General new text begin , new text end and
deleted text begin its agents within the Department of Human Services, including deleted text end county fraud investigators,
for investigations related to recipient or provider fraud and employees of providers when
the provider is suspected of committing public assistance fraud;

(11) the Department of Public Safety for support in identity verification;

(12) local, state, and federal law enforcement agencies for the purpose of ascertaining
the last known address and employment location of an individual who is the subject of a
criminal investigation;

(13) the Department of Health for the purposes of epidemiologic investigations;

(14) the Department of Corrections for the purposes of tracking incarceration of
applicants; and

(15) contracted third parties, to the extent necessary to aid in identity verification,
adjudication, administration, and evaluation of the program.

(c) Data on individuals and employers that are collected, maintained, or used by the
department in an investigation under section 268B.19, 268B.21, 268B.22, or 268B.23 are
confidential as to data on individuals and protected nonpublic data not on individuals as
defined in section 13.02, subdivisions 3 and 13, and must not be disclosed except under
statute or district court order or to a party named in a criminal proceeding, administrative
or judicial, for preparation of a defense.

(d) Data gathered by the department in the administration of this chapter must not be
made the subject or the basis for any suit in any civil proceedings, administrative or judicial,
unless the action is initiated by the department.

Sec. 12. new text begin EXISTING DUTIES ABOLISHED; TRANSFERS PROVIDED.
new text end

new text begin Subdivision 1. new text end

new text begin Duties abolished. new text end

new text begin Duties pertaining to the investigation of fraud, misuse,
and other unlawful use of public funds in the Offices of Inspector General in the Departments
of Education; Human Services; and Children, Youth, and Families are abolished effective
the day after the inspector general under Minnesota Statutes, section 3.991, certifies in
writing to the commissioner of the respective department and the commissioner of
management and budget that the inspector general has assumed responsibility for these
duties.
new text end

new text begin Subd. 2. new text end

new text begin Inspector general transfers. new text end

new text begin Pursuant to Minnesota Statutes, section 15.039,
all active investigations, obligations, court actions, contracts, records, personnel, and
unexpended funds shall transfer from each department in subdivision 1 to the inspector
general under Minnesota Statutes, section 3.991, except as provided by the inspector general.
new text end

Sec. 13. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2024, sections 13.321, subdivision 12; and 127A.21, new text end new text begin are repealed.
new text end

Sec. 14. new text begin EFFECTIVE DATE.
new text end

new text begin (a) Sections 1 to 7 and 12 are effective July 1, 2025.
new text end

new text begin (b) Section 8 is effective the day after the inspector general notifies the revisor of statutes
that the Office of the Inspector General has assumed responsibility for identifying and
investigating fraud, misuse, or other unlawful use of public funds in the Department of
Children, Youth, and Families.
new text end

new text begin (c) Sections 9 to 11 are effective the day after the inspector general notifies the revisor
of statutes that the Office of the Inspector General has assumed responsibility for identifying
and investigating fraud, misuse, or other unlawful use of public funds in the Department of
Human Services.
new text end

new text begin (d) Section 13 is effective the day after the inspector general under Minnesota Statutes,
section 3.991, notifies the revisor of statutes that the Office of the Inspector General under
Minnesota Statutes, section 3.991, has assumed responsibility for identifying and
investigating fraud, misuse, or other unlawful use of public funds in the Department of
Education.
new text end

APPENDIX

Repealed Minnesota Statutes: H0001-3

13.321 PREKINDERGARTEN TO GRADE 12 EDUCATIONAL DATA CODED ELSEWHERE.

Subd. 12.

Office of the Inspector General; access to data.

Data involving the Department of Education's Office of the Inspector General are governed by section 127A.21.

127A.21 OFFICE OF THE INSPECTOR GENERAL.

Subdivision 1.

Establishment of Office of the Inspector General; powers; duties.

The commissioner must establish within the department an Office of the Inspector General. The inspector general shall report directly to the commissioner. The Office of the Inspector General is charged with protecting the integrity of the department and the state by detecting and preventing fraud, waste, and abuse in department programs. The Office of the Inspector General must conduct independent and objective investigations to promote the integrity of the department's programs and operations. When fraud or other misuse of public funds is detected, the Office of the Inspector General must report it to the appropriate law enforcement entity and collaborate and cooperate with law enforcement to assist in the investigation and any subsequent civil and criminal prosecution.

Subd. 1a.

Definitions.

(a) For purposes of this section, the following terms have the meanings given.

(b) "Abuse" means actions that may, directly or indirectly, result in unnecessary costs to department programs. Abuse may involve paying for items or services when there is no legal entitlement to that payment.

(c) "Department program" means a program funded by the Department of Education that involves the transfer or disbursement of public funds or other resources to a program participant. "Department program" includes state and federal aids or grants received by a school district or charter school or other program participant.

(d) "Fraud" means an intentional or deliberate act to deprive another of property or money or to acquire property or money by deception or other unfair means. Fraud includes intentionally submitting false information to the department for the purpose of obtaining a greater compensation or benefit than that to which the person is legally entitled. Fraud also includes failure to correct errors in the maintenance of records in a timely manner after a request by the department.

(e) "Investigation" means an audit, investigation, proceeding, or inquiry by the Office of the Inspector General related to a program participant in a department program.

(f) "Program participant" means any entity or person, including associated persons, that receives, disburses, or has custody of funds or other resources transferred or disbursed under a department program.

(g) "Waste" means practices that, directly or indirectly, result in unnecessary costs to department programs, such as misusing resources.

(h) For purposes of this section, neither "fraud," "waste," nor "abuse" includes decisions on instruction, curriculum, personnel, or other discretionary policy decisions made by a school district, charter school, cooperative unit as defined by section 123A.24, subdivision 2, or any library, library system, or library district defined in section 134.001.

Subd. 2.

Hiring; reporting; procedures.

(a) The commissioner, or the commissioner's designee, must hire an inspector general to lead the Office of the Inspector General. The inspector general must hire a deputy inspector general and, at the discretion of the inspector general, sufficient assistant inspectors general to carry out the duties of the office. The inspector general, deputy inspector general, and any assistant inspectors general serve in the classified service.

(b) In a form and manner determined by the inspector general, the Office of the Inspector General must develop a public platform for the public to report instances of potential fraud, waste, or abuse of public funds administered by the department. Nothing in this paragraph shall be construed to give a member of the public standing to sue based on allegations of fraud, waste, or abuse.

(c) The inspector general shall establish procedures for conducting investigations. Procedures adopted under this subdivision are not subject to chapter 14, including section 14.386.

Subd. 3.

Subpoenas.

(a) For the purpose of an investigation, the inspector general or a designee may administer oaths and affirmations, subpoena witnesses, compel attendance, take evidence, and issue subpoenas duces tecum to require the production of books, papers, correspondence, memoranda, agreements, financial records, or other documents or records relevant to the investigation.

(b) A subpoena issued pursuant to this subdivision must state that the subpoena recipient may not disclose the fact that the subpoena was issued or the fact that the requested records have been given to the inspector general, or their staff, except:

(1) in so far as the disclosure is necessary to find and disclose the records;

(2) pursuant to court order; or

(3) to legal counsel for the purposes of responding to the subpoena.

(c) The fees for service of a subpoena must be paid in the same manner as prescribed by law for a service of process issued by a district court.

(d) The subpoena issued under this subdivision shall be enforceable through the district court in the district where the subpoena is issued.

Subd. 4.

Access to records.

(a) For purposes of an investigation, and regardless of the data's classification under chapter 13, the Office of the Inspector General shall have access to all relevant books, accounts, documents, data, and property related to department programs that are maintained by a program participant, charter school, or government entity as defined by section 13.02.

(b) Notwithstanding paragraph (a), the Office of the Inspector General must issue a subpoena under subdivision 3 in order to access routing and account numbers to which Department of Education funds have been disbursed.

(c) Records requested by the Office of the Inspector General under this subdivision shall be provided in a format, place, and time frame reasonably requested by the Office of the Inspector General.

(d) The department may enter into specific agreements with other state agencies related to records requests by the Office of the Inspector General.

Subd. 5.

Sanctions; appeal.

(a) This subdivision does not authorize any sanction that reduces, pauses, or otherwise interrupts state or federal aid to a school district, charter school, cooperative unit as defined by section 123A.24, subdivision 2, or any library, library system, or library district defined in section 134.001.

(b) The inspector general may recommend that the commissioner impose appropriate temporary sanctions, including withholding of payments under the department program, on a program participant pending an investigation by the Office of the Inspector General if:

(1) during the course of an investigation, the Office of the Inspector General finds credible indicia of fraud, waste, or abuse by the program participant;

(2) there has been a criminal, civil, or administrative adjudication of fraud, waste, or abuse against the program participant in Minnesota or in another state or jurisdiction;

(3) the program participant was receiving funds under any contract or registered in any program administered by another Minnesota state agency, a government agency in another state, or a federal agency, and was excluded from that contract or program for reasons credibly indicating fraud, waste, or abuse by the program participant; or

(4) the program participant has a pattern of noncompliance with an investigation.

(c) If an investigation finds, by a preponderance of the evidence, fraud, waste, or abuse by a program participant, the inspector general may, after reviewing all facts and evidence and when acting judiciously on a case-by-case basis, recommend that the commissioner impose appropriate sanctions on the program participant.

(d) Unless prohibited by law, the commissioner has the authority to implement recommendations by the inspector general, including imposing appropriate sanctions, temporarily or otherwise, on a program participant. Sanctions may include ending program participation, stopping disbursement of funds or resources, monetary recovery, and termination of department contracts with the participant for any current or future department program or contract. A sanction may be imposed for up to the longest period permitted by state or federal law. Sanctions authorized under this subdivision are in addition to other remedies and penalties available under law.

(e) If the commissioner imposes sanctions on a program participant under this subdivision, the commissioner must notify the participant in writing within seven business days of imposing the sanction, unless requested in writing by a law enforcement agency to temporarily delay issuing the notice to prevent disruption of an ongoing law enforcement agency investigation. A notice of sanction must state:

(1) the sanction being imposed;

(2) the general allegations that form the basis for the sanction;

(3) the duration of the sanction;

(4) the department programs to which the sanction applies; and

(5) how the program participant may appeal the sanction pursuant to paragraph (e).

(f) A program participant sanctioned under this subdivision may, within 30 days after the date the notice of sanction was mailed to the participant, appeal the determination by requesting in writing that the commissioner initiate a contested case proceeding under chapter 14. The scope of any contested case hearing is limited to the sanction imposed under this subdivision. An appeal request must specify with particularity each disputed item, the reason for the dispute, and must include the name and contact information of the person or entity that may be contacted regarding the appeal.

(g) The commissioner shall lift sanctions imposed under this subdivision if the Office of the Inspector General determines there is insufficient evidence of fraud, waste, or abuse by the program participant. The commissioner must notify the participant in writing within seven business days of lifting the sanction.

Subd. 6.

Data practices.

(a) It is not a violation of rights conferred by chapter 13 or any other statute related to the confidentiality of government data for a government entity as defined in section 13.02 to provide data or information under this section.

(b) The inspector general is subject to the Government Data Practices Act, chapter 13, and shall protect from unlawful disclosure data classified as not public. Data collected, created, received, or maintained by the inspector general relating to an audit, investigation, proceeding, or inquiry are subject to section 13.39.

Subd. 7.

Retaliation, interference prohibited.

(a) An employee or other individual who discloses information to the Office of the Inspector General about fraud, waste, or abuse in department programs is protected under section 181.932, governing disclosure of information by employees.

(b) No state employee may interfere with or obstruct an investigation authorized by this section.