SF 3900
1st Engrossment - 94th Legislature (2025 - 2026)
Posted on 04/06/2026 01:53 p.m.
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A bill for an act
relating to state government; implementing recommendations of the legislative
auditor regarding agency grant, inventory, and debt collection practices; amending
Minnesota Statutes 2024, sections 3.978, subdivision 3; 16B.24, by adding a
subdivision; 16B.97, subdivisions 3, 4; 16B.98, subdivisions 3, 6, by adding
subdivisions; 16D.03, by adding a subdivision; Minnesota Statutes 2025
Supplement, sections 16A.057, subdivision 5; 16B.98, subdivision 6a; 16D.09,
subdivision 1; proposing coding for new law in Minnesota Statutes, chapter 16A.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2024, section 3.978, subdivision 3, is amended to read:
Subd. 3.
Penalties.
(a) If a person refuses or neglects to obey any lawful direction of
the legislative auditor, a deputy or assistant, or withholds any information, book, record,
paper or other document called for by the legislative auditor for the purpose of examination,
after having been lawfully required by order or subpoena, upon application by the auditor,
a judge of the district court in the county where the order or subpoena was made returnable
shall compel obedience or punish disobedience as for contempt, as in the case of a similar
order or subpoena issued by the court.
(b) A person who swears falsely concerning any matter stated under oath is guilty of a
gross misdemeanor.
new text begin
(c) Materials and information provided to the legislative auditor by public officials or
public employees are documents subject to section 609.43.
new text end
Sec. 2.
Minnesota Statutes 2025 Supplement, section 16A.057, subdivision 5, is amended
to read:
Subd. 5.
Monitoring Office of the Legislative Auditor audits.
(a) The commissioner
must review audit reports from the Office of the Legislative Auditor and take appropriate
steps to address internal control problems found in executive agencies.
new text begin
(b) The commissioner must regularly provide guidance to all executive agencies on how
to implement Office of the Legislative Auditor recommendations related to internal controls.
new text end
deleted text begin (b)deleted text end new text begin (c)new text end The commissioner must submit a report to the legislative auditor no later than
September 1 of each year detailing the implementation status of all recommendations
identified in an auditor's financial audit, program evaluation, or special review during the
prior five years. The report must include a specific itemization of recommendations that
have not been implemented during that period, along with the basis for that decision.
new text begin
(d) The commissioner must provide technical assistance, as resources allow, to agencies
that have not implemented recommendations from the Office of the Legislative Auditor
related to internal controls, as detailed in the annual report in section 3.971, subdivision 10,
paragraph (a).
new text end
Sec. 3.
new text begin
[16A.38] PAYMENT OVERSIGHT.
new text end
new text begin
(a) Unless otherwise specified, an appropriation, allocation, payment, or transfer of
money made through a state agency or board to a nongovernmental entity is subject to
oversight by the state agency or board, in a manner consistent with sections 16B.97 to
16B.991 or 16C.001 to 16C.36, as applicable.
new text end
new text begin
(b) This section does not apply to general obligation grants as defined in section 16A.695,
capital project grants to political subdivisions as defined in section 16A.86, or capital project
grants otherwise subject to section 16A.642. These grants are subject to the policies and
procedures adopted by the commissioner of management and budget and other requirements
specified in applicable law.
new text end
new text begin
(c) This section does not apply to payments made by the commissioner of revenue under
chapter 290C.
new text end
Sec. 4.
Minnesota Statutes 2024, section 16B.24, is amended by adding a subdivision to
read:
new text begin Subd. 4a. new text end
new text begin Inventory training. new text end
new text begin
All state agency employees responsible for maintaining
an inventory of state real property or state personal property must annually complete training
provided by the commissioner. The training must include but is not limited to accountability
and oversight requirements for different types of assets and property, how to ensure adequate
segregation of duties, and identification of inventory-related risks.
new text end
Sec. 5.
Minnesota Statutes 2024, section 16B.97, subdivision 3, is amended to read:
Subd. 3.
Discretionary powers.
The commissioner has the authority to:
deleted text begin
(1) review grants management practices and establish and enforce policy and procedure
improvements;
deleted text end
deleted text begin (2)deleted text end new text begin (1)new text end sponsor, support, and facilitate innovative and collaborative grants management
projects with public and private organizations;
deleted text begin (3)deleted text end new text begin (2)new text end review, recommend, and implement alternative strategies for grants management;
deleted text begin (4)deleted text end new text begin (3)new text end collect and disseminate information, issue reports relating to grants management,
and sponsor and conduct conferences and studies;
deleted text begin (5)deleted text end new text begin (4)new text end participate in conferences and other appropriate activities related to grants
management issues;
deleted text begin (6)deleted text end new text begin (5)new text end suspend or debar grantees from eligibility to receive state-issued grants for up to
three years for reasons specified in Minnesota Rules, part 1230.1150, subpart 2. A grantee
may obtain an administrative hearing pursuant to sections 14.57 to 14.62 before a suspension
or debarment is effective by filing a written request for hearing within 20 days of notification
of suspension or debarment;new text begin and
new text end
deleted text begin
(7) establish offices for the purpose of carrying out grants governance, oversight, and
management; and
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deleted text begin (8)deleted text end new text begin (6)new text end require granting agencies to submit grant solicitation documents for review prior
to issuance at dollar levels determined by the commissioner.
Sec. 6.
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. Exceptions shall expire or be renewed after five
years. 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 and waste 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 practicesdeleted text begin .deleted text end new text begin ;
new text end
new text begin
(11) ensure that all executive agencies comply with the training requirements under
section 16B.98, subdivision 6a;
new text end
new text begin
(12) review executive agency grants management practices and establish and enforce
policy or procedure improvements as needed, with a focus on high-risk grant programs and
grantees; and
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new text begin
(13) establish offices for the purpose of carrying out grants governance, oversight, and
management.
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. 7.
Minnesota Statutes 2024, section 16B.98, subdivision 3, is amended to read:
Subd. 3.
Conflict of interest.
(a) The commissioner must develop policies regarding
code of ethics and conflict of interest designed to prevent conflicts of interest for employees,
committee members, or others involved in the recommendation, awarding, and administration
of grants. The policies must apply to employees who are directly or indirectly in the grants
process, deleted text begin which may include the followingdeleted text end new text begin includingnew text end :
(1) developing request for proposals or evaluation criteria;
(2) drafting, recommending, awarding, amending, revising, or entering into grant
agreements;
(3) evaluating or monitoring performance; deleted text begin ordeleted text end new text begin and
new text end
(4) authorizing payments.
(b) The policies must include:
(1) a process to make all parties to the grant aware of policies and laws relating to conflict
of interest, and training on how to avoid and address potential conflicts; and
(2) a process under which those who have a conflict of interest or a potential conflict of
interest must disclose the matter.
(c) If the employee, appointing authority, or commissioner determines that a conflict of
interest exists, the matter shall be assigned to another employee who does not have a conflict
of interest. If it is not possible to assign the matter to an employee who does not have a
conflict of interest, interested personnel shall be notified of the conflict and the employee
may proceed with the assignment.
Sec. 8.
Minnesota Statutes 2024, section 16B.98, is amended by adding a subdivision to
read:
new text begin Subd. 4a. new text end
new text begin Reporting of investigations. new text end
new text begin
The head of a granting agency must report to
the commissioner any grantee being investigated due to a credible allegation of fraud. The
commissioner must maintain a list of grantees reported under this subdivision. The
commissioner must not remove a grantee from the list until an investigation is complete or
closed.
new text end
Sec. 9.
Minnesota Statutes 2024, section 16B.98, subdivision 6, is amended to read:
Subd. 6.
Grant administrationnew text begin ; site visit requirementnew text end .
new text begin (a) new text end A granting agency shall
diligently administer and monitor any grant it has entered into. A granting agency must
report to the commissioner at any time at the commissioner's request on the status of any
grant to which the agency is a party.
new text begin
(b) A granting agency must conduct an unannounced, on-site, and in-person site visit
for any grant over $50,000 and annual unannounced, on-site, and in-person site visits for
any grant over $250,000. The commissioner may approve exceptions to this requirement if
the granting agency sufficiently justifies why unannounced, on-site, and in-person site visits
are not suitable for a specific grant program.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective January 15, 2027.
new text end
Sec. 10.
Minnesota Statutes 2025 Supplement, section 16B.98, subdivision 6a, is amended
to read:
Subd. 6a.
Grants management training.
new text begin (a) new text end All state agency staff assigned grant
management responsibilities must complete initial grants management training before
assuming grants management job duties and must complete continuing grants management
training on an annual basis.
new text begin
(b) All state agency staff assigned to conduct financial reconciliation of grants must
complete initial training on conducting financial reconciliations before assuming grant
management responsibilities and must complete continuing financial reconciliation training
on an annual basis.
new text end
new text begin
(c) All state agencies must report annually to the commissioner the number of staff
members who have received grants management training and training on conducting final
reconciliation of grants.
new text end
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(d) The commissioner must ensure that all state agencies comply with the training
requirements in this section.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective January 15, 2027.
new text end
Sec. 11.
Minnesota Statutes 2024, section 16B.98, is amended by adding a subdivision to
read:
new text begin Subd. 15. new text end
new text begin Hiring limitation. new text end
new text begin
For a period of 12 months after a granting agency awards
a grant, the grantee must not hire an individual to work with that grant who was a state
employee involved in awarding or managing the grant. If a grantee violates this subdivision,
the granting agency must immediately terminate the grant, the grantee must repay to the
state all money received under the grant, and the commissioner must debar the grantee for
a period of 24 months beginning on the first day of the individual's employment with the
grantee.
new text end
Sec. 12.
Minnesota Statutes 2024, section 16D.03, is amended by adding a subdivision to
read:
new text begin Subd. 4. new text end
new text begin Training. new text end
new text begin
A state agency employee who oversees balances owed to the state
must complete training developed by the commissioners of Minnesota Management and
Budget and the Department of Revenue to quantify such balances and determine options
for collection. As part of this training, the commissioners must establish guidance for state
agency staff to follow when collecting balances owed to the state.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective January 15, 2027.
new text end
Sec. 13.
Minnesota Statutes 2025 Supplement, section 16D.09, subdivision 1, is amended
to read:
Subdivision 1.
Generally.
(a) When a debt is determined by a state agency to be
uncollectible, the debt may be written off by the state agency from the state agency's financial
accounting records and no longer recognized as an account receivable for financial reporting
purposes. A debt is considered to be uncollectible when (1) all reasonable collection efforts
have been exhausted, (2) the cost of further collection action will exceed the amount
recoverable, (3) the debt is legally without merit or cannot be substantiated by evidence,
(4) the debtor cannot be located, (5) the available assets or income, current or anticipated,
that may be available for payment of the debt are insufficient, (6) the debt has been
discharged in bankruptcy, (7) the applicable statute of limitations for collection of the debt
has expired, or (8) it is not in the public interest to pursue collection of the debt.
(b) Uncollectible debt new text begin and the collection efforts taken new text end must be reported by the state
agency as part of its quarterly reports to the commissioner of management and budget.new text begin If
no collection efforts were made for a particular debt, the state agency must report its rationale.new text end
The basis for the determination of the uncollectibility of the debt must be maintained by
the state agency.
new text begin (c) new text end If an uncollectible debt equals or exceeds $100,000, the agency shall notify the chairs
and ranking minority members of the legislative committees with jurisdiction over the state
agency's budget at the time the debt is determined to be uncollectible. The information
reported shall contain the entity associated with the uncollected debt, the amount of the
debt, the revenue type, new text begin the collection efforts made or the reason no collection efforts were
made, new text end the reason the debt is considered uncollectible, and the duration the debt has been
outstanding.
new text begin (d)new text end The commissioner of management and budget shall report to the chairs and ranking
minority members of deleted text begin thedeleted text end new text begin allnew text end legislative committees deleted text begin with jurisdiction over Minnesota
Management and Budgetdeleted text end an annual summarynew text begin , by agency,new text end of the number and dollar amount
of debts determined to be uncollectible during the previous fiscal year by November 30 of
each year. Determining that the debt is uncollectible does not cancel the legal obligation of
the debtor to pay the debt.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective July 1, 2027.
new text end