HF 3621

2nd Engrossment - 94th Legislature (2025 - 2026)

Posted on 03/16/2026 03:43 p.m.

A bill for an act
relating to state government; withholding payments to program participants under
certain circumstances; amending Minnesota Statutes 2025 Supplement, section
15.013.

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

Section 1.

Minnesota Statutes 2025 Supplement, section 15.013, is amended to read:

15.013 PROGRAM PAYMENTS WITHHELD; FRAUD.

deleted text begin Subdivision 1. deleted text end

deleted text begin Definitions. deleted text end

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

deleted text begin (b) "Entity" means any corporation, partnership, proprietorship, firm, enterprise, franchise,
association, organization, or any other legal entity that engages in either nonprofit or
profit-making activities.
deleted text end

deleted text begin (c) "Evidence" means credible evidence obtained from an internal agency investigation,
audits, court records, law enforcement investigations, or investigations by other state or
federal agencies.
deleted text end

deleted text begin (d) "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
a 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.
deleted text end

deleted text begin (e) "Individual" means a natural person.
deleted text end

deleted text begin (f) "Program" means any program funded by a state or federal agency that involves the
transfer or disbursement of public funds or other public resources.
deleted text end

deleted text begin (g) "Program participant" means an entity, or an individual on behalf of an entity, that
receives, disburses, or has custody of funds or other resources transferred or disbursed under
a program.
deleted text end

deleted text begin (h) "Agency" has the meaning given in section 16B.01, subdivision 2, and includes the
Minnesota State Colleges and Universities.
deleted text end

deleted text begin Subd. 2. deleted text end

deleted text begin Administrative withholding of payments. deleted text end

deleted text begin (a) The head of an agency may
withhold payments to a program participant in a program administered by that agency for
a period not to exceed 60 days if the agency head determines that a preponderance of the
evidence shows that the program participant has committed fraud to obtain payments under
the program.
deleted text end

deleted text begin (b) Notwithstanding subdivision 3, the agency head must notify the program participant
of the decision to withhold payments at least 24 hours before withholding a payment. The
notice must:
deleted text end

deleted text begin (1) state that payments will be withheld in accordance with this section;
deleted text end

deleted text begin (2) state the date the administrative withholding of payments is effective;
deleted text end

deleted text begin (3) state the reasons for withholding payments, excluding specific information that may
jeopardize an active investigation;
deleted text end

deleted text begin (4) state the date the administrative withholding period terminates;
deleted text end

deleted text begin (5) inform the program participant of the right to submit written evidence for
consideration by the agency head; and
deleted text end

deleted text begin (6) inform the program participant of their rights under chapter 14 to appeal the decision
to withhold payment.
deleted text end

deleted text begin (c) Following notice and to the extent practicable, the agency must ensure that any person
whose public funds are interrupted and who is not implicated in the suspected fraud receives
notice of their rights related to continued receipt of the public funds, services, or programs
for which they are eligible. The agency head must provide a point of contact for the impacted
persons.
deleted text end

deleted text begin (d) A program participant may appeal an agency head's decision under this subdivision
by initiating a contested case proceeding under chapter 14 or by petitioning the court for
relief, including injunctive relief.
deleted text end

deleted text begin (e) This subdivision does not apply if an agency is precluded from withholding payments
to a program participant by federal law or obligations under a contract.
deleted text end

deleted text begin Subd. 3. deleted text end

deleted text begin Data classification and access. deleted text end

deleted text begin (a) During the administrative payment
withholding period under subdivision 2, data relating to evidence of fraud are classified as:
(1) confidential data on individuals pursuant to section 13.02, subdivision 3; or (2) protected
nonpublic data pursuant to section 13.02, subdivision 13, in the case of data not on
individuals.
deleted text end

deleted text begin (b) All data relating to evidence of fraud become public at the termination of the
withholding period unless classified as not public data under state or federal law. The identity
of a complainant is private data on individuals, as defined in section 13.02, subdivision 12.
deleted text end

deleted text begin (c) An agency may disclose data classified as confidential or protected nonpublic under
this section to a federal, state, or local government agency or a law enforcement agency if
the agency determines that access will help prevent fraud against public programs or aid
the law enforcement process.
deleted text end

deleted text begin Subd. 4. deleted text end

deleted text begin Court order. deleted text end

deleted text begin The head of an agency may petition the court for a temporary
order pursuant to Rule 65 of the Minnesota Rules of Civil Procedure to withhold payments
to a program participant in a program administered by that agency if the agency head
determines that a preponderance of the evidence shows that the program participant has
committed fraud to obtain payments under the program.
deleted text end

deleted text begin Subd. 5. deleted text end

deleted text begin Report. deleted text end

deleted text begin (a) An agency that has withheld a payment under this section must
report the following to the commissioner of management and budget by March 1, 2026:
deleted text end

deleted text begin (1) the number of program participants from whom payments have been withheld;
deleted text end

deleted text begin (2) a description of the reason the payments were withheld from the program participant;
deleted text end

deleted text begin (3) the dollar amount of payments withheld;
deleted text end

deleted text begin (4) the identification of the program;
deleted text end

deleted text begin (5) whether the payments withheld were state or federal funds; and
deleted text end

deleted text begin (6) whether the withholding of payment was challenged by a program participant and
the outcome of the challenge.
deleted text end

deleted text begin (b) The commissioner of management and budget must compile the reports from the
agencies under paragraph (a) and submit the compiled report to the chairs and ranking
minority members of the committees in the house of representatives and the senate with
jurisdiction over state government, judiciary, health and human services, and education by
March 15, 2026.
deleted text end

deleted text begin Subd. 6. deleted text end

deleted text begin Sunset. deleted text end

deleted text begin This section expires July 1, 2027.
deleted 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) "Credible allegation of fraud" means an allegation of fraud that has been verified by
the head of a state agency from any source, including but not limited to fraud complaints;
patterns identified through audits, civil cases, law enforcement investigations, or
investigations by other state or federal agencies; and court filings and other legal documents,
including but not limited to police reports, complaints, indictments, information, affidavits,
declarations, and search warrants.
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 or other unfair means. Fraud includes
intentionally submitting false information to a federal, state, or local government entity for
the purpose of obtaining a greater compensation or benefit than that to which the person is
legally entitled. Fraud also includes acts which constitute a crime against any program, or
the attempts or plans to commit a crime against any program, 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 609.542, 609.625, and 609.63, and substantially
similar federal laws.
new text end

new text begin (d) "Individual" means a natural person.
new text end

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

new text begin (f) "Program participant" means any entity or individual that receives, disburses, or has
custody of funds or other resources transferred or disbursed under a program.
new text end

new text begin (g) "State agency" means any department or agency of the state as defined in sections
15.01 and 15.012.
new text end

new text begin Subd. 2. new text end

new text begin Withholding of payments. new text end

new text begin (a) Except as otherwise authorized and to the extent
permitted by federal law, the head of any state agency may withhold payments to a program
participant in any program administered by that agency if the agency head determines the
program participant is the subject of a credible allegation of fraud under investigation that
is related to any program administered by that agency. The head of any agency may also
withhold payments to a program participant in any program administered by that agency if
another agency head has determined there is a credible allegation of fraud under investigation
and the program participant is a subject of the investigation.
new text end

new text begin (b) The state agency head must send notice of the withholding of payments to the program
participant within five days of taking such action. The notice must:
new text end

new text begin (1) state that payments are being withheld in accordance with this section;
new text end

new text begin (2) state the reasons for withholding payments, but need not disclose specific information
concerning an ongoing investigation;
new text end

new text begin (3) state that the withholding is for a temporary period and cite the circumstances under
which withholding shall be terminated; and
new text end

new text begin (4) inform the program participant of the right to submit written evidence for
consideration by the state agency head.
new text end

new text begin (c) Following notice, to the extent practicable, the agency must ensure that any person
whose public funds are interrupted and who is not implicated in the suspected fraud receives
notice of their rights to continued receipt of the public funds, services, or programs for
which they are eligible. The agency head must provide a point of contact for persons
impacted.
new text end

new text begin (d) If the agency head withholds payments under this subdivision, the provider, vendor,
individual, associated individual, or associated entity has a right to request administrative
reconsideration. A request for administrative reconsideration must be made in writing,
stating with specificity the reasons the payment withholding decision is in error, and include
documents to support the request. Within 60 days after receipt of the request, the agency
head shall judiciously review allegations, facts, evidence available to the agency head and
information submitted by the provider, vendor, individual, associated individual, or associated
entity to determine whether the payment withholding should remain in place.
new text end

new text begin (e) The withholding of payments shall not continue after the state agency head determines
there is insufficient evidence of fraud by the program participant, or after legal proceedings
relating to the alleged fraud are completed, unless the state agency head is authorized by
law to take additional action against the program participant and complies with all
requirements in law to take such action.
new text end

new text begin (f) The withholding of payments is a temporary action and is not subject to appeal under
chapter 14.
new text end

new text begin (g) This section does not supersede any other section of law authorizing withholding of
payments, including but not limited to sections 127A.21, subdivision 5; 142A.12, subdivision
5; 245.095, subdivision 5; and 256B.064, subdivision 2, paragraph (b).
new text end

new text begin Subd. 3. new text end

new text begin Data classification and access. new text end

new text begin (a) During the payment withholding period
under this section, all data relating to a credible allegation of fraud under this section are
classified as: (1) confidential data on individuals pursuant to section 13.02, subdivision 3;
or (2) protected nonpublic data pursuant to section 13.02, subdivision 13, in the case of data
not on individuals.
new text end

new text begin (b) Except for the identity of a complainant, after a determination has been made under
subdivision 2, paragraph (e), that withholding of payments shall not continue, all data relating
to a credible allegation of fraud under this section become public unless classified otherwise
under state or federal law. The identity of a complainant is private.
new text end

new text begin (c) Any state agency may disclose any data classified as confidential or protected
nonpublic under this section to any federal, state, or local government agency, or any law
enforcement agency, if the state agency determines that access will help prevent fraud
against public programs or aid the law enforcement process.
new text end