HF 2

1st Engrossment - 94th Legislature (2025 - 2026)

Posted on 02/20/2025 03:39 p.m.

A bill for an act
relating to state government; requiring fraud reporting; strengthening grants
management requirements; amending Minnesota Statutes 2024, sections 16B.97,
subdivisions 2, 4; 16B.98, subdivisions 4, 5; 16B.981, subdivisions 2, 3; 16B.991,
subdivision 1; proposing coding for new law in Minnesota Statutes, chapter 15.

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

Section 1.

new text begin [15.0572] FRAUD REPORTING REQUIRED.
new text end

new text begin A state employee who believes they have discovered evidence of fraud must immediately
notify the employee's supervisor, the head of the employee's agency or their designee, or
the legislative auditor. If the state employee notifies the employee's supervisor, agency head,
or agency head's designee, then the supervisor, agency head, or designee must immediately
notify the legislative auditor. The legislative auditor must report to the Legislative Audit
Commission if there are multiple reports about the same agency. 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.
new text end

Sec. 2.

new text begin [15.0574] ORGANIZATIONAL CHARTS POSTED.
new text end

new text begin Each state agency must prominently post on the agency's website a current organizational
chart that includes the name and contact information for the agency head, all deputy and
assistant agency heads, and the head of each division or bureau within the agency.
new text end

Sec. 3.

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, waste, and abuse; 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. 4.

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 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 deleted text begin and deleted text end new text begin , new text end waste new text begin , and abuse new text end in grants
processes new text begin , with each comment concerning fraud reported as required under section 15.0572 new text end ;

(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. 5.

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 immediately new text end report the violation or
suspected violation to the employee's supervisor, the commissioner or the commissioner's
designee, 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
designee must immediately notify the legislative auditor. new text end The legislative auditor 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. 6.

Minnesota Statutes 2024, section 16B.98, subdivision 5, is amended to read:

Subd. 5.

Creation and validity of grant agreements.

(a) A grant agreement and
amendments are not valid and do not bind unless:

(1) the grant agreement and amendments have been executed by the head of the agency
or a delegate who is party to the grant;

(2) the grant agreement and amendments have been approved by the commissioner;

(3) the accounting system shows an encumbrance for the amount of the grant in
accordance with policy approved by the commissioner except as provided in subdivision
11; and

(4) the grant agreement and amendments include an effective date that references either
section 16C.05, subdivision 2, or 16B.98, subdivisions 5 and 7, as determined by the granting
agency.

(b) The combined grant agreement and amendments must not exceed five years without
specific, written approval by the commissioner according to established policy, procedures,
and standards, or unless the commissioner determines that a longer duration is in the best
interest of the state.

(c) A fully executed copy of the grant agreement with all amendments and other required
records relating to the grant must be kept on file at the granting agency for a time equal to
that required of grantees in subdivision 8.

(d) Grant agreements must comply with policies established by the commissioner for
minimum grant agreement standards and practices. new text begin Grant agreements must require the
grantee to prominently post on the grantee's website the names of, and contact information
for, the organization's leadership and the employee or other person who directly manages
and oversees the grant for the grantee.
new text end

(e) The attorney general may periodically review and evaluate a sample of state agency
grants to ensure compliance with applicable laws.

Sec. 7.

Minnesota Statutes 2024, section 16B.981, subdivision 2, is amended to read:

Subd. 2.

Financial information required; determination of ability to perform.

For
grants of $50,000 or more and subject to sections 16B.97 and 16B.98, before an agency
awards a competitive, legislatively named, single-source, or sole-source grant, the agency
must complete a preaward risk assessment to assess the risk that a potential grantee cannot
or would not perform the required duties. In making this assessment, the agency must review
the following information as applicable:

(1) the potential grantee's history of performing duties similar to those required by the
grant, whether the grant requires the potential grantee to perform services at a significantly
increased scale, and whether the grant will require significant changes to the operation of
the potential grantee's organization;

(2) for a potential grantee that is a nonprofit organization, the potential grantee's most
recent Form 990 or Form 990-EZ filed with the Internal Revenue Service. If the potential
grantee has not been in existence long enough or is not required to file Form 990 or Form
990-EZ, the potential grantee must demonstrate to the agency's satisfaction that the potential
grantee is exempt and must instead submit the potential grantee's most recent board-reviewed
financial statements and documentation of new text begin appropriate new text end internal controls or, if there is no
such board, by the applicant's managing group new text begin . At a minimum, the potential grantee's internal
controls must require the segregation of duties concerning the authorization, disbursement,
and recording of expenditures new text end ;

(3) for a potential grantee that is a for-profit business, the potential grantee's most recent
federal and state tax returns, current financial statements, certification that the business is
not under bankruptcy proceedings, and disclosure of any liens on its assets. If a business
has not been in business long enough to have a tax return, the grantee must demonstrate to
the agency's satisfaction that the grantee has appropriate internal deleted text begin financial deleted text end controls new text begin . At a
minimum, the potential grantee's internal controls must require the segregation of duties
concerning the authorization, disbursement, and recording of expenditures new text end ;

(4) evidence of good standing with the secretary of state under chapter 317A, or other
applicable law;

(5) if the potential grantee is required to complete an audit under section 309.53,
subdivision 3, the potential grantee's most recent audit report performed by an independent
third party in accordance with generally accepted accounting principles; and

(6) certification, provided by the potential grantee, that none of its current principals
have been convicted of a felony financial crime in the last ten years. For this section, a
principal is defined as a public official, a board member, or staff with the authority to access
funds provided by this agency or determine how those funds are used.

Sec. 8.

Minnesota Statutes 2024, section 16B.981, subdivision 3, is amended to read:

Subd. 3.

Additional measures for some grantees.

The agency deleted text begin may deleted text end new text begin must new text end require
additional information and deleted text begin may deleted text end provide enhanced oversight for grantees that have not
previously received state or federal grants for similar amounts or similar duties and have
not yet demonstrated the ability to perform the duties required under the grant on the scale
required. new text begin For nonprofit organizations, this additional information must include but is not
limited to two additional years of Form 990 or Form 990-EZ filed with the Internal Revenue
Service, where applicable. Before awarding a grant, the agency must inquire about
compensation that, in the agency's estimation, is in excess of the amount customarily paid
to those in comparable positions.
new text end

Sec. 9.

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. 10. new text begin CONFORMING CHANGES TO GRANTS POLICIES.
new text end

new text begin The commissioner of administration must update the commissioner's grants management
policies and procedures as necessary to conform with this act.
new text end

Sec. 11. new text begin EFFECTIVE DATE.
new text end

new text begin This act is effective the day following final enactment.
new text end