HF 3395

Introduction - 94th Legislature (2025 - 2026)

Posted on 03/12/2026 04:36 p.m.

A bill for an act
relating to state government; establishing the Fraud Isn't Free Act; requiring
corrective action plans, enrollment freezes, agency budget reductions, and employee
dismissal when fraud is committed against a program administered by the state;
incorporating fraud impacts in budget forecasts; repealing the expiration of agency
payment withholding authority; amending Minnesota Statutes 2024, section
16A.103, by adding a subdivision; Minnesota Statutes 2025 Supplement, section
16A.103, subdivision 1a; proposing coding for new law in Minnesota Statutes,
chapters 15; 16A; repealing Minnesota Statutes 2025 Supplement, section 15.013,
subdivision 6.

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

Section 1. new text begin CITATION.
new text end

new text begin This act may be cited as the "Fraud Isn't Free Act."
new text end

Sec. 2.

new text begin [15.0135] FRAUD; CORRECTIVE ACTION PLANS AND OTHER
REQUIREMENTS.
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 16B.01, subdivision 2, and includes the
Minnesota State Colleges and Universities.
new text end

new text begin (c) "Fraud" means an intentional or deliberate act to deprive another of property or
money or to acquire property or money by deception. Fraud includes knowingly submitting
false information to a federal, state, or local government entity for the purpose of obtaining
greater compensation or benefit than the person is legally entitled. Fraud also includes acts
that constitute a crime against any program, or the attempts or plans to commit those crimes,
including but not limited to theft in violation of section 609.52, perjury in violation of section
609.48, and aggravated forgery and forgery in violation of sections 609.625 and 609.63,
and substantially similar federal laws.
new text end

new text begin (d) "Law enforcement agency" means an agency of the state or a political subdivision
with the power to conduct criminal investigations.
new text end

new text begin (e) "Program" means any program administered by an agency and funded by the state
or the federal government that involves the transfer or disbursement of public funds or other
public resources.
new text end

new text begin Subd. 2. new text end

new text begin Fraud suspected. new text end

new text begin An agency head must report the total estimated amount of
money fraudulently obtained under a program to the commissioner of management and
budget and the chair and vice-chair of the Legislative Audit Commission, and take the
actions required under subdivisions 3 to 5, no later than 30 days after:
new text end

new text begin (1) the agency head withholds payment due to suspected fraud under section 15.013,
section 256B.04, or another state or federal law; or
new text end

new text begin (2) a law enforcement agency completes an investigation of alleged fraud committed
against a program and reports to the agency head and the chair and vice-chair of the
Legislative Audit Commission as required under subdivision 6.
new text end

new text begin Subd. 3. new text end

new text begin Corrective action plan. new text end

new text begin (a) The agency head must submit a corrective action
plan to the chairs and ranking minority members of the legislative committees with
jurisdiction over the agency's operating budget.
new text end

new text begin (b) The plan must include the following elements:
new text end

new text begin (1) a summary of the suspected fraud, including the total estimated amount of money
fraudulently obtained, how the suspected fraud may have been perpetrated, and the agency
staff who are responsible for the program at issue;
new text end

new text begin (2) any steps, including but not limited to staff dismissal, staff discipline, or, at a
minimum, staff training, that the agency has taken or will take to better detect or prevent
fraud moving forward;
new text end

new text begin (3) any recommended changes to state law; and
new text end

new text begin (4) the agency's plan to recover all money that was fraudulently obtained.
new text end

new text begin Subd. 4. new text end

new text begin Enrollment suspended. new text end

new text begin The agency head must suspend further enrollment in
the program until the agency has completed the requirements under section 16A.093,
subdivision 1, paragraph (b).
new text end

new text begin Subd. 5. new text end

new text begin Leadership and employee dismissal; hiring prohibited. new text end

new text begin (a) The agency head
must discharge each employee of the agency whose intentional or negligent act or failure
to act abetted the fraud or allowed it to occur. For purposes of this paragraph, "employee"
includes but is not limited to:
new text end

new text begin (1) the deputy or assistant agency head responsible for the division or unit that administers
the program; and
new text end

new text begin (2) the director or other head of the division or unit identified in clause (1).
new text end

new text begin (b) The discharge procedure is as provided in section 43A.33, subdivision 3.
new text end

new text begin (c) A person discharged under this subdivision is prohibited from state employment for
five years.
new text end

new text begin Subd. 6. new text end

new text begin Law enforcement investigations; reporting. new text end

new text begin (a) When a law enforcement
agency completes an investigation of alleged fraud committed against a program and refers
the case for prosecution to the United States attorney for the district of Minnesota, the
attorney general, or a county attorney, the law enforcement agency must promptly notify
the head of the state agency that administers the program and the chair and vice-chair of
the Legislative Audit Commission. The notification must identify all suspects, the program
at issue, and the time period. The notification must also summarize evidence of fraud.
new text end

new text begin (b) The agency head and the chair and vice-chair of the Legislative Audit Commission
must treat the information provided by a law enforcement agency under paragraph (a) as
criminal investigative data under chapter 13.
new text end

Sec. 3.

new text begin [16A.093] AGENCY BUDGET REDUCTIONS DUE TO FRAUD.
new text end

new text begin Subdivision 1. new text end

new text begin Budget reduction required. new text end

new text begin (a) When the commissioner receives a fraud
report under section 15.0135, the commissioner must reduce unexpended allotments in the
current biennium for the reporting agency's administration or central office functions by
ten percent, and for the reporting agency head's salary as prescribed under section 15A.082
or other law by 25 percent. Notwithstanding any other law to the contrary, the commissioner
is empowered to defer or suspend prior statutorily created obligations that would prevent
effecting such reductions. The commissioner must also reduce the appropriation base for
agency administration by ten percent, and the appropriation base for agency head salary by
25 percent, for the subsequent biennium.
new text end

new text begin (b) The reductions required under paragraph (a) continue until the agency head certifies
to the commissioner and the chairs and ranking minority members of the legislative
committees with jurisdiction over the agency's operating budget that:
new text end

new text begin (1) the agency has referred all relevant evidence to law enforcement;
new text end

new text begin (2) responsible agency staff have been identified and discharged as required under section
15.0135, subdivision 5; and
new text end

new text begin (3) ....... percent of the state money fraudulently obtained has been recovered by the
proper authority and deposited in the general fund.
new text end

new text begin Subd. 2. new text end

new text begin Reporting. new text end

new text begin The commissioner must promptly report each reduction under
subdivision 1 to the chairs and ranking minority members of the legislative committees with
jurisdiction over the agency's operating budget and to the chairs and ranking minority
members of the Committee on Finance in the senate and the Committee on Ways and Means
in the house of representatives.
new text end

Sec. 4.

Minnesota Statutes 2025 Supplement, section 16A.103, subdivision 1a, is amended
to read:

Subd. 1a.

Forecast parameters.

The forecast must assume the continuation of current
laws and reasonable estimates of projected growth in the national and state economies and
affected populations. Revenue must be estimated for all sources provided for in current law.
Expenditures must be estimated for all obligations imposed by law and those projected to
occur as a result of inflation and variables outside the control of the legislature. Expenditure
estimates related to the amount of state bonding must not include any assumptions of future
authorizations of state general obligation bonds. new text begin The forecast must address fraud in state
programs as required under subdivision 1k.
new text end

Sec. 5.

Minnesota Statutes 2024, section 16A.103, is amended by adding a subdivision to
read:

new text begin Subd. 1k. new text end

new text begin Fraud in state programs. new text end

new text begin The forecast must include an estimate and discussion
of the impact of fraud on the state budget and summarize any actions the administration has
taken since the last forecast to detect and prevent fraud in programs funded or administered
by the state.
new text end

Sec. 6. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2025 Supplement, section 15.013, subdivision 6, new text end new text begin is repealed.
new text end

APPENDIX

Repealed Minnesota Statutes: 26-06890

15.013 PROGRAM PAYMENTS WITHHELD; FRAUD.

Subd. 6.

Sunset.

This section expires July 1, 2027.