SF 856

8th Engrossment - 94th Legislature (2025 - 2026) Posted on 04/08/2025 09:52am

A bill for an act
relating to state government; creating the Office of the Inspector General; creating
an advisory committee; requiring reports; transferring certain agency duties;
appropriating money; amending Minnesota Statutes 2024, sections 3.971, by adding
a subdivision; 15A.0815, subdivision 2; 142A.03, by adding a subdivision;
142A.12, subdivision 5; 144.05, by adding a subdivision; 245.095, subdivision 5;
256.01, by adding a subdivision; 609.456, subdivision 2; proposing coding for
new law as Minnesota Statutes, chapter 15D; 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 3.971, is amended by adding a subdivision
to read:

new text begin Subd. 3b. new text end

new text begin Public reports of fraud and misuse. new text end

new text begin Notwithstanding the classification of
data as not public, the legislative auditor must refer all reports from the public about potential
fraud or misuse, as those terms are defined in chapter 15D, to the inspector general. The
legislative auditor may coordinate reviews and investigations with the inspector general
when coordination conserves resources and does not compromise the reviews or
investigations.
new text end

Sec. 2.

Minnesota Statutes 2024, section 15A.0815, subdivision 2, is amended to read:

Subd. 2.

Agency head salaries.

The salary for a position listed in this subdivision shall
be determined by the Compensation Council under section 15A.082. The commissioner of
management and budget must publish the salaries on the department's website. This
subdivision applies to the following positions:

Commissioner of administration;

Commissioner of agriculture;

Commissioner of education;

Commissioner of children, youth, and families;

Commissioner of commerce;

Commissioner of corrections;

Commissioner of health;

Commissioner, Minnesota Office of Higher Education;

Commissioner, Minnesota IT Services;

Commissioner, Housing Finance Agency;

Commissioner of human rights;

Commissioner of human services;

Commissioner of labor and industry;

Commissioner of management and budget;

Commissioner of natural resources;

Commissioner, Pollution Control Agency;

Commissioner of public safety;

Commissioner of revenue;

Commissioner of employment and economic development;

Commissioner of transportation;

Commissioner of veterans affairs;

Executive director of the Gambling Control Board;

Executive director of the Minnesota State Lottery;

Executive director of the Office of Cannabis Management;

new text begin Inspector general;
new text end

Commissioner of Iron Range resources and rehabilitation;

Commissioner, Bureau of Mediation Services;

Ombudsman for mental health and developmental disabilities;

Ombudsperson for corrections;

Chair, Metropolitan Council;

Chair, Metropolitan Airports Commission;

School trust lands director;

Executive director of pari-mutuel racing;

Commissioner, Public Utilities Commission;

Chief Executive Officer, Direct Care and Treatment; and

Director of the Office of Emergency Medical Services.

Sec. 3.

new text begin [15D.01] OFFICE OF THE INSPECTOR GENERAL.
new text end

new text begin (a) The inspector general serves as an independent entity responsible for ensuring
accountability, transparency, and integrity in the operations of state agencies and programs.
new text end

new text begin (b) The inspector general must operate independently of all state executive branch
agencies and report directly to the chief administrative law judge under chapter 14. The
inspector general must not be subject to direction or interference from any executive or
legislative authority, other than the chief administrative law judge.
new text end

new text begin (c) The inspector general shall direct an Office of the Inspector General.
new text end

new text begin (d) The inspector general serves in the unclassified service.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2026.
new text end

Sec. 4.

new text begin [15D.02] DEFINITIONS.
new text end

new text begin For the purposes of this chapter, the following terms have the meanings given:
new text end

new text begin (1) "agency program" means a program funded or administered by a state agency,
including grants and contracts;
new text end

new text begin (2) "fraud" means an intentional or deceptive act or failure to act to gain an unlawful
benefit;
new text end

new text begin (3) "investigation" means an audit, review, or inquiry conducted by the inspector general
to detect or prevent fraud or misuse;
new text end

new text begin (4) "misuse" means improper use of authority or position for personal gain or to cause
harm to others, including the improper use of public resources or programs contrary to their
intended purpose; and
new text end

new text begin (5) "personal gain" means a benefit to a person; to a person's spouse, parent, child, or
other legal dependent; or to an in-law of the person or the person's child.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2026.
new text end

Sec. 5.

new text begin [15D.03] INSPECTOR GENERAL.
new text end

new text begin Subdivision 1. new text end

new text begin Minimum qualifications. new text end

new text begin (a) To be eligible to be appointed as inspector
general, a candidate must:
new text end

new text begin (1) have a bachelor's or higher degree in criminal justice, public administration, law, or
a related field;
new text end

new text begin (2) have at least ten years of professional experience in auditing, investigations, law
enforcement, or a related area;
new text end

new text begin (3) hold a professional certificate from the Association of Inspectors General, including
Certified Inspector General or Certified Inspector General Investigator; and
new text end

new text begin (4) demonstrate a commitment to safeguarding the mission of public service and provide
a public disclosure of prior professional opinions, positions, or actions that may influence
the candidate's approach to the role.
new text end

new text begin (b) Current or former commissioners, agency heads, deputy agency heads, governors,
or legislators are not eligible to serve as inspector general within five years of their service
in those roles. A person elected to an office other than the governor or legislature is not
eligible until ten years after the end of service in an elected position.
new text end

new text begin Subd. 2. new text end

new text begin Appointment. new text end

new text begin The Legislative Inspector General Advisory Commission will
recommend candidates for inspector general after a competitive process from among eligible
applicants for the position of inspector general. To be recommended by the commission, a
candidate must be approved for recommendation by five of the eight members of the
commission. The commission must assess eligible candidates based on qualifications,
including experience in auditing, financial analysis, public administration, law enforcement,
or related fields. The inspector general is appointed by the governor, after consideration of
recommendations from the Legislative Inspector General Advisory Commission, with
confirmation by a vote of three-fifths of the senate. Section 15.066, subdivision 3, does not
apply.
new text end

new text begin Subd. 3. new text end

new text begin Term. new text end

new text begin The inspector general serves a five-year term and may be appointed to
unlimited additional terms.
new text end

new text begin Subd. 4. new text end

new text begin Disclosure. new text end

new text begin A candidate considered by the Legislative Inspector General
Oversight Commission or selected for appointment by the governor must disclose all political
affiliations, appointments, campaign work, or partisan activities prior to confirmation.
new text end

new text begin Subd. 5. new text end

new text begin Nonpartisanship. new text end

new text begin The inspector general, and all employees of the office, must
perform duties of the office without regard to partisan preferences or influences. While
serving, the inspector general, and all employees of the office, may not engage in partisan
activities, campaign work, or public political speech, unless protected by the state or United
States Constitution.
new text end

new text begin Subd. 6. new text end

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

new text begin The inspector general and all employees
of the office are public officials for purposes of the conflict of interest and statement of
economic interest 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. 7. new text end

new text begin Removal. new text end

new text begin The inspector general may only be removed before the expiration
of the term for cause after a public hearing and with approval of both the senate and the
house of representatives.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2026.
new text end

Sec. 6.

new text begin [15D.04] POWERS AND DUTIES.
new text end

new text begin Subdivision 1. new text end

new text begin Authorized powers and responsibilities. new text end

new text begin The inspector general is
authorized and responsible to:
new text end

new text begin (1) conduct inspections, evaluations, and investigations of state executive branch agencies
and programs according to professional auditing standards to: (i) identify fraud and misuse;
(ii) make recommendations for changes to programs to prevent fraud and misuse; and (iii)
protect the integrity of the use of public funds, data, and systems;
new text end

new text begin (2) refer matters for civil, criminal, or administrative action to the Bureau of Criminal
Apprehension, the attorney general's office, or other appropriate authorities;
new text end

new text begin (3) recommend legislative or policy changes to improve program efficiency and
effectiveness;
new text end

new text begin (4) publish reports on completion of an audit or investigation summarizing findings,
recommendations, and outcomes of the inspector general's activities;
new text end

new text begin (5) investigate any public or private entity that receives public funds to ensure compliance
with applicable laws, proper use of funds, and adherence to program requirements;
new text end

new text begin (6) submit an annual report summarizing the work of the office to the Legislative
Inspector General Advisory Commission and make the report publicly available by posting
the report on the inspector general's website;
new text end

new text begin (7) at the inspector general's discretion, seek a court order to freeze or stop distribution
of public funds, or alert relevant commissioners or heads of agencies on an emergency basis
before an investigation is concluded that the inspector general has a reasonable suspicion
that fraud or misuse is being committed, with a recommendation to freeze or cease
distribution of funds, with notice to the appropriate law enforcement agencies; and
new text end

new text begin (8) establish and maintain a current exclusion list in a format readily accessible to
agencies that identifies each program and individual for which the inspector general has
obtained a court order to freeze or cease distribution of funds or made a recommendation
under clause (7) to freeze or cease distribution of funds.
new text end

new text begin Subd. 2. new text end

new text begin Relationship to powers and duties of other agencies. new text end

new text begin (a) The inspector general
has authority to investigate fraud and misuse of public funds across all programs administered
by state agencies.
new text end

new text begin (b) The inspector general may perform the inspector general's duties and apply the
inspector general's authority without obtaining approval from another agency.
new text end

new text begin (c) The Department of Human Services has primary responsibility to investigate fraud
in the Medicaid program, but the inspector general has authority to conduct independent
investigations related to Medicaid fraud as necessary.
new text end

new text begin (d) The Department of Children, Youth, and Families has primary responsibility to
investigate fraud in the child care assistance program, but the inspector general has authority
to conduct independent investigations related to the child care assistance program.
new text end

new text begin (e) The Department of Health has primary responsibility to investigate fraud related to
women, infants, and children (WIC) and food support programs, but the inspector general
has authority to conduct independent investigations related to WIC and food support
programs.
new text end

new text begin (f) The inspector general has concurrent authority over general compliance reviews,
information technology security audits, or administrative program integrity assessments
that are related to fraud or misuse.
new text end

new text begin (g) The inspector general must refer all reports from the public about potential fraud or
misuse to the legislative auditor. The inspector general may coordinate investigations with
the legislative auditor when coordination conserves resources and does not compromise an
investigation.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2026.
new text end

Sec. 7.

new text begin [15D.042] AUXILIARY POWERS.
new text end

new text begin Subdivision 1. new text end

new text begin Subpoena power. new text end

new text begin In all matters relating to official duties, the inspector
general has the powers possessed by courts of law to issue and have subpoenas served.
new text end

new text begin Subd. 2. new text end

new text begin Inquiry and inspection power; duty to aid inspector general. new text end

new text begin All public
officials and their deputies and employees, and all corporations, firms, and individuals
having business involving the receipt, disbursement, or custody of public funds shall at all
times:
new text end

new text begin (1) afford reasonable facilities for examinations by the inspector general;
new text end

new text begin (2) provide returns and reports required by the inspector general;
new text end

new text begin (3) attend and answer under oath the inspector general's lawful inquiries;
new text end

new text begin (4) produce and exhibit all books, accounts, documents, data of any classification, and
property that the inspector general requests to inspect; and
new text end

new text begin (5) in all things cooperate with the inspector general.
new text end

new text begin Subd. 3. new text end

new text begin Penalties. new text end

new text begin (a) If a person refuses or neglects to obey any lawful direction of
the inspector general, a deputy or assistant, or withholds any information, book, record,
paper or other document called for by the inspector general for the purpose of examination,
after having been lawfully required by order or subpoena, upon application by the inspector
general, 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.
new text end

new text begin (b) A person who swears falsely concerning any matter stated under oath is guilty of a
gross misdemeanor.
new text end

Sec. 8.

new text begin [15D.043] IDENTIFICATION OF FRAUD REPORTING TOOL.
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, under chapter 15, 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. 9.

new text begin [15D.046] DATA PRACTICES.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

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

new text begin (b) "Confidential data on individuals" has the meaning given in section 13.02, subdivision
3.
new text end

new text begin (c) "Government entity" has the meaning given in section 13.02, subdivision 7a.
new text end

new text begin (d) "Nonpublic data" has the meaning given in section 13.02, subdivision 9.
new text end

new text begin (e) "Not public data" has the meaning given in section 13.02, subdivision 8a.
new text end

new text begin (f) "Private data on individuals" has the meaning given in section 13.02, subdivision 12.
new text end

new text begin (g) "Protected nonpublic data" has the meaning given in section 13.02, subdivision 13.
new text end

new text begin Subd. 2. new text end

new text begin Government Data Practices Act. new text end

new text begin The inspector general is a government entity
and is subject to the Government Data Practices Act, chapter 13.
new text end

new text begin Subd. 3. new text end

new text begin Access. new text end

new text begin In order to perform the duties authorized by this chapter, the inspector
general shall have access to data of any classification, including data classified as not public
data. It is not a violation of chapter 13 or any other statute classifying government data as
not public data if a government entity provides data pursuant to a subpoena issued under
this chapter.
new text end

new text begin Subd. 4. new text end

new text begin Dissemination. new text end

new text begin The inspector general may disseminate data of any classification,
including not public data, to:
new text end

new text begin (1) a government entity, other than a law enforcement agency or prosecuting authority,
if the dissemination of the data aids a pending investigation or administrative action;
new text end

new text begin (2) a law enforcement agency or prosecuting authority if there is reason to believe that
the data are evidence of criminal activity within the agency's or authority's jurisdiction; or
new text end

new text begin (3) the legislative auditor as provided in section 15D.04, subdivision 2, paragraph (g).
new text end

new text begin Subd. 5. new text end

new text begin Data classifications. new text end

new text begin (a) Notwithstanding any other law, data relating to an
investigation conducted under this chapter are confidential data on individuals or protected
nonpublic data while the investigation is active. Whether an investigation is active shall be
determined by the inspector general.
new text end

new text begin (b) Data relating to an investigation conducted under this chapter become public data
upon the inspector general's completion of the investigation, unless:
new text end

new text begin (1) the release of the data would jeopardize another active investigation by the inspector
general or another government entity;
new text end

new text begin (2) the inspector general reasonably believes the data will be used in litigation related
to any civil, criminal, or administrative actions, including reconsideration or appeal of any
such action; or
new text end

new text begin (3) the data are classified as not public under another statute or paragraph (e).
new text end

new text begin (c) Data subject to paragraph (b), clause (2), are confidential data on individuals or
protected nonpublic data and become public when the litigation has been completed or the
time period to appeal has expired, or the litigation is no longer being actively pursued.
new text end

new text begin (d) Unless the data are subject to a more restrictive classification, upon the inspector
general's decision to no longer actively pursue an investigation under this chapter, data
relating to an investigation are private data on individuals or nonpublic data except the
following data are public:
new text end

new text begin (1) data relating to the investigation's general description, existence, status, and
disposition; and
new text end

new text begin (2) data that document the inspector general's work.
new text end

new text begin (e) Inactive investigative data on an individual supplying information for an investigation
that could reasonably be used to determine the individual's identity are private data on
individuals if the information supplied was needed for the investigation and would not have
been provided to the inspector general without an assurance to the individual that the
individual's identity would remain private.
new text end

new text begin (f) Data relating to an investigation conducted under this chapter that are obtained from
an entity that is not a government entity have the same classification that the data would
have if obtained from a government entity.
new text end

new text begin Subd. 6. new text end

new text begin Privileges. new text end

new text begin Nothing in this section or section 15D.042 requires the disclosure
of documents or information that is legally privileged under statute or other law, including
documents or information subject to section 13.393 or 595.02.
new text end

Sec. 10.

new text begin [15D.05] RESOURCES.
new text end

new text begin Subdivision 1. new text end

new text begin Staff. new text end

new text begin (a) The inspector general may hire and manage staff as necessary.
The inspector general must employ at least two individuals with experience in criminal
investigations to serve as investigators for the office. To the extent the inspector general
deems advisable, these individuals must have previous experience in complex investigations
as law enforcement officers. The staff in the Office of the Inspector General shall serve in
the classified civil service. Except as provided in paragraph (b), compensation for employees
of the inspector general in the classified service who are represented by an exclusive
representative shall be governed by a collective bargaining agreement negotiated between
the commissioner of management and budget and the exclusive representative. Compensation
for employees of the inspector general in the classified service who are not represented by
an exclusive representative shall be as provided in the commissioner's plan under section
43A.18, subdivision 2.
new text end

new text begin (b) Section 15.039, subdivision 7, applies to employees transferred into the Office of
the Inspector General from other offices of inspectors general within the first year following
enactment of chapter 15D.
new text end

new text begin Subd. 2. new text end

new text begin Contracting. new text end

new text begin The inspector general may contract with external experts to
support the work of the office, subject to section 16C.08.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2026.
new text end

Sec. 11.

new text begin [15D.06] REPORTING AND TRANSPARENCY.
new text end

new text begin Subdivision 1. new text end

new text begin Reports. new text end

new text begin The inspector general must issue public reports detailing
completed audits, investigations, and corrective actions taken.
new text end

new text begin Subd. 2. new text end

new text begin Public tips. new text end

new text begin The inspector general must maintain a phone line and website for
reporting fraud and misuse that allows the person making the report to remain anonymous.
new text end

new text begin Subd. 3. new text end

new text begin Report; inactive investigations. new text end

new text begin By December 1, 2026, and each December
1 thereafter, the inspector general must submit a report to the legislative auditor and the
chairs and ranking minority members of the legislative committees with jurisdiction over
state government and data practices regarding all investigations the inspector general did
not open after receiving a tip or complaint or decided to no longer actively pursue for the
preceding calendar year. The report must include, at a minimum, summary data as defined
in section 13.02, subdivision 19, for:
new text end

new text begin (1) all complaints or tips received;
new text end

new text begin (2) the type of allegation;
new text end

new text begin (3) if the complaint or tip was not frivolous, the reason that the inspector general did
not open an investigation or decided to no longer pursue the investigation; and
new text end

new text begin (4) referrals to other agencies or the legislative auditor.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2026.
new text end

Sec. 12.

new text begin [15D.07] PROFESSIONAL STANDARDS AND REVIEW.
new text end

new text begin (a) The inspector general's activities must adhere to professional standards as promulgated
by the Association of Inspectors General or other recognized bodies.
new text end

new text begin (b) The chief administrative law judge may contract for an external quality assurance
review of the inspector general every three years and must make findings from the review
public.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2026.
new text end

Sec. 13.

new text begin [15D.08] LEGISLATIVE INSPECTOR GENERAL ADVISORY
COMMISSION.
new text end

new text begin Subdivision 1. new text end

new text begin Membership. new text end

new text begin The Legislative Inspector General Advisory Commission
is comprised of:
new text end

new text begin (1) two senators appointed by the majority leader of the senate;
new text end

new text begin (2) two senators appointed by the minority leader of the senate;
new text end

new text begin (3) two members of the house of representatives appointed by the speaker of the house
of representatives; and
new text end

new text begin (4) two members of the house of representatives appointed by the minority leader of the
house of representatives.
new text end

new text begin Subd. 2. new text end

new text begin Terms. new text end

new text begin Members serve at the pleasure of their appointing authorities and each
member serves until a replacement is appointed.
new text end

new text begin Subd. 3. new text end

new text begin Chair. new text end

new text begin The commission must select a chair from among its members by January
31 of each odd-numbered year. The chair shall serve until a successor is elected. The chair
must alternate biennially between the senate and the house of representatives.
new text end

new text begin Subd. 4. new text end

new text begin Duties. new text end

new text begin The Legislative Inspector General Advisory Commission must:
new text end

new text begin (1) consider applicants for and make recommendations to the chief administrative law
judge for the position of inspector general; and
new text end

new text begin (2) may conduct hearings to review the work of the inspector general to ensure
impartiality, independence, and effectiveness.
new text end

new text begin Subd. 5. new text end

new text begin Per diem; expense reimbursement. new text end

new text begin Members may be compensated for time
spent on commission duties and may be reimbursed for expenses according to the rules of
their respective bodies.
new text end

new text begin Subd. 6. new text end

new text begin Meeting space; staff. new text end

new text begin The Legislative Coordinating Commission must provide
meeting space and staff to assist the commission in performing its duties.
new text end

new text begin Subd. 7. new text end

new text begin Open meetings. new text end

new text begin The Legislative Inspector General Advisory Commission is
subject to the requirements in section 3.055.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment. The
commission must submit recommendations for an inspector general by January 1, 2026.
new text end

Sec. 14.

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 or inspector general new text end a detailed description of the alleged incident or
incidents.

Sec. 15. new text begin OFFICE OF THE INSPECTOR GENERAL ESTABLISHMENT AND
TRANSITION.
new text end

new text begin Subdivision 1. new text end

new text begin Appointment. new text end

new text begin By January 1, 2026, the Legislative Inspector General
Advisory Commission must make recommendations for appointment of an inspector general
under Minnesota Statutes, section 15D.03. By February 1, 2026, the chief judge of the Office
of Administrative Hearings must appoint an inspector general from among the recommended
candidates.
new text end

new text begin Subd. 2. new text end

new text begin Operational. new text end

new text begin By September 1, 2026, the Office of the Inspector General must
be fully operational.
new text end

new text begin Subd. 3. new text end

new text begin Transition of employees. new text end

new text begin (a) Before September 1, 2026, all officers and
employees employed in an office of inspector general for a state agency shall transition to
employment under the Office of the Inspector General under Minnesota Statutes, chapter
15D, except as specified in subdivision 6.
new text end

new text begin (b) The following protections shall apply to employees who are transferred to the Office
of the Inspector General under Minnesota Statutes, chapter 15D, from state agencies:
new text end

new text begin (1) no transferred employee shall have their employment status and job classification
altered as a result of the transfer;
new text end

new text begin (2) transferred employees who were represented by an exclusive representative prior to
the transfer shall continue to be represented by the same exclusive representative after the
transfer;
new text end

new text begin (3) any applicable collective bargaining agreements with exclusive representatives shall
continue in full force and effect for transferred employees after the transfer while the
agreement remains in effect;
new text end

new text begin (4) when an employee in a temporary unclassified position is transferred to the Office
of the Inspector General, the total length of time that the employee has served in the
appointment must include all time served in the appointment at the transferring agency and
the time served in the appointment at the Office of the Inspector General. An employee in
a temporary unclassified position who was hired by a transferring agency through an open
competitive selection process under a policy enacted by the commissioner of management
and budget is considered to have been hired through a competitive selection process after
the transfer;
new text end

new text begin (5) the state must meet and negotiate with the exclusive representatives of the transferred
employees about proposed changes to the transferred employees' terms and conditions of
employment to the extent that the proposed changes are not addressed in the applicable
collective bargaining agreement; and
new text end

new text begin (6) if the state transfers ownership or control of any facilities, services, or operations of
the Office of the Inspector General to another private or public entity by subcontracting,
sale, assignment, lease, or other transfer, the state must require as a written condition of the
transfer of ownership or control the following:
new text end

new text begin (i) employees who perform work in the facilities, services, or operations must be offered
employment with the entity acquiring ownership or control before the entity offers
employment to any individual who was not employed by the transferring agency at the time
of the transfer; and
new text end

new text begin (ii) the wage and benefit standards of the transferred employees must not be reduced by
the entity acquiring ownership or control through the expiration of the collective bargaining
agreement in effect at the time of the transfer or for a period of two years after the transfer,
whichever is longer.
new text end

new text begin There is no liability on the part of, and no cause of action arises against, the state of
Minnesota or its officers or agents for any action or inaction of any entity acquiring ownership
or control of any facilities, services, or operations of the department.
new text end

new text begin Subd. 4. new text end

new text begin Assets. new text end

new text begin Before September 1, 2026, assets and unused appropriations for existing
offices of inspectors general shall be transferred to the Office of the Inspector General under
Minnesota Statutes, chapter 15D, except as specified in subdivision 6.
new text end

new text begin Subd. 5. new text end

new text begin Office space. new text end

new text begin The commissioner of administration must provide office space
on the Capitol Mall complex for the Office of the Inspector General under Minnesota
Statutes, chapter 15D, under a rental agreement.
new text end

new text begin Subd. 6. new text end

new text begin Exceptions. new text end

new text begin (a) Positions in the Department of Human Services will not transfer
to the Office of the Inspector General.
new text end

new text begin (b) No employees or positions in the Department of Corrections are transferred under
this section.
new text end

new text begin (c) No employees or positions in the student maltreatment program of the Department
of Education or other Department of Education employees or positions dedicated to student
maltreatment investigations under Minnesota Statutes, chapter 260E, are transferred under
this section.
new text end

new text begin (d) Positions in the following divisions and teams in the Department of Children, Youth,
and Families will not transfer to the Office of the Inspector General:
new text end

new text begin (1) the licensing functions under Minnesota Statutes, chapter 142B;
new text end

new text begin (2) the certification functions under Minnesota Statutes, chapter 142C;
new text end

new text begin (3) the child care assistance program integrity functions under Minnesota Statutes,
chapter 142E;
new text end

new text begin (4) the food support and antipoverty programs performing recipient fraud prevention
investigation functions under Minnesota Statutes, chapter 142F;
new text end

new text begin (5) the Minnesota family assistance program performing recipient fraud prevention
investigation functions under Minnesota Statutes, chapter 142G;
new text end

new text begin (6) the great start compensation support payment program under Minnesota Statutes,
section 142D.21, and Minnesota Statutes, chapter 142E;
new text end

new text begin (7) the operations and policy functions for the programs in clauses (1) to (6); and
new text end

new text begin (8) the legal staff for the programs in clauses (1) to (6).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2026.
new text end

Sec. 16. new text begin LEGISLATIVE INSPECTOR GENERAL ADVISORY COMMISSION;
INITIAL APPOINTMENTS AND FIRST MEETING.
new text end

new text begin Subdivision 1. new text end

new text begin Initial appointments. new text end

new text begin Appointing authorities must make appointments
to the Legislative Inspector General Advisory Commission by August 1, 2025.
new text end

new text begin Subd. 2. new text end

new text begin First meeting. new text end

new text begin The senate majority leader must designate one member of the
Legislative Inspector General Advisory Commission to convene the first meeting of the
Legislative Inspector General Advisory Commission by September 15, 2025.
new text end

new text begin Subd. 3. new text end

new text begin Chair. new text end

new text begin The Legislative Inspector General Advisory Commission must elect a
chair from among its senate members at its first meeting. The first chair shall serve until a
successor is selected at the start of the next biennium as provided in Minnesota Statutes,
section 15D.08, subdivision 3.
new text end

Sec. 17. new text begin INTERAGENCY AGREEMENTS.
new text end

new text begin (a) By December 31, 2026, the Office of the Inspector General must enter into an
interagency agreement with the Department of Human Services. The interagency agreement
must include a clause on cost-sharing for investigations that may require multiagency
coordination and a clause that details what process will be followed if a joint investigation
is required. The interagency agreement must not limit the inspector general's authority or
authorized powers and responsibilities. The agency and the inspector general may coordinate
investigative efforts as necessary or practical, but an interagency agreement must not
diminish, delay, or restrict the inspector general's ability to investigate fraud and misuse.
new text end

new text begin (b) By December 31, 2026, the Office of the Inspector General must enter into an
interagency agreement with the Department of Children, Youth, and Families. The
interagency agreement must include a clause on cost-sharing for investigations that may
require multiagency coordination and a clause that details what process will be followed if
a joint investigation is required. The interagency agreement must not limit the inspector
general's authority or authorized powers and responsibilities. The agency and the inspector
general may coordinate investigative efforts as necessary or practical, but an interagency
agreement must not diminish, delay, or restrict the inspector general's ability to investigate
fraud and misuse.
new text end

Sec. 18. new text begin APPROPRIATIONS.
new text end

new text begin (a) $....... in fiscal year 2026 and $....... in fiscal year 2027 are appropriated from the
general fund to the Office of Administrative Hearings to support the creation of the Office
of the Inspector General. This is a onetime appropriation.
new text end

new text begin (b) $....... in fiscal year 2026 and $....... in fiscal year 2027 are appropriated from the
general fund to the Office of the Inspector General for the purposes of this act.
new text end

ARTICLE 2

CONFORMING ITEMS AND REPEALERS

Section 1.

Minnesota Statutes 2024, section 142A.03, is amended by adding a subdivision
to read:

new text begin Subd. 35. new text end

new text begin Office of the Inspector General; reports. new text end

new text begin The commissioner must submit
final investigative reports to the inspector general, serving under section 15D.01, for any
investigation conducted by the commissioner into fraud or misuse, as defined in section
15D.02, within the child care assistance program.
new text end

Sec. 2.

Minnesota Statutes 2024, section 142A.12, subdivision 5, is amended to read:

Subd. 5.

Withholding of payments.

(a) Except as otherwise provided by state or federal
law, the commissioner may withhold payments to a provider, vendor, individual, associated
individual, or associated entity in any program administered by the commissioner if the
commissioner determines there is a credible allegation of fraud for which an investigation
is pending for a program administered by a Minnesota state or federal agency.

(b) For purposes of this subdivision, "credible allegation of fraud" means an allegation
that has been verified by the commissioner from any source, including but not limited to:

(1) fraud hotline complaints;

(2) claims data mining;

(3) patterns identified through provider audits, civil false claims cases, and law
enforcement investigations; deleted text begin and
deleted text end

(4) court filings and other legal documents, including but not limited to police reports,
complaints, indictments, informations, affidavits, declarations, and search warrants new text begin ; and
new text end

new text begin (5) information from the inspector general, including information listed on the inspector
general's exclusion list under section 15D.04, subdivision 1, clause (8) new text end .

(c) The commissioner must send notice of the withholding of payments within five days
of taking such action. The notice must:

(1) state that payments are being withheld according to this subdivision;

(2) set forth the general allegations related to the withholding action, except the notice
need not disclose specific information concerning an ongoing investigation;

(3) state that the withholding is for a temporary period and cite the circumstances under
which the withholding will be terminated; and

(4) inform the provider, vendor, individual, associated individual, or associated entity
of the right to submit written evidence to contest the withholding action for consideration
by the commissioner.

(d) If the commissioner 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, state
with specificity the reasons the payment withholding decision is in error, and include
documents to support the request. Within 60 days from receipt of the request, the
commissioner shall judiciously review allegations, facts, evidence available to the
commissioner, and information submitted by the provider, vendor, individual, associated
individual, or associated entity to determine whether the payment withholding should remain
in place.

(e) The commissioner shall stop withholding payments if the commissioner determines
there is insufficient evidence of fraud by the provider, vendor, individual, associated
individual, or associated entity or when legal proceedings relating to the alleged fraud are
completed, unless the commissioner has sent notice under subdivision 3 to the provider,
vendor, individual, associated individual, or associated entity.

(f) The withholding of payments is a temporary action and is not subject to appeal under
section 256.0451 or chapter 14.

Sec. 3.

Minnesota Statutes 2024, section 144.05, is amended by adding a subdivision to
read:

new text begin Subd. 9. new text end

new text begin Office of the Inspector General; reports. new text end

new text begin The commissioner must submit
final investigative reports to the inspector general serving under section 15D.01 for any
investigation conducted by the commissioner into fraud or misuse, as defined in section
15D.02, within the special supplemental nutrition program for women, infants, and children.
new text end

Sec. 4.

Minnesota Statutes 2024, section 245.095, subdivision 5, is amended to read:

Subd. 5.

Withholding of payments.

(a) Except as otherwise provided by state or federal
law, the commissioner may withhold payments to a provider, vendor, individual, associated
individual, or associated entity in any program administered by the commissioner if the
commissioner determines there is a credible allegation of fraud for which an investigation
is pending for a program administered by a Minnesota state or federal agency.

(b) For purposes of this subdivision, "credible allegation of fraud" means an allegation
that has been verified by the commissioner from any source, including but not limited to:

(1) fraud hotline complaints;

(2) claims data mining;

(3) patterns identified through provider audits, civil false claims cases, and law
enforcement investigations; deleted text begin and
deleted text end

(4) court filings and other legal documents, including but not limited to police reports,
complaints, indictments, informations, affidavits, declarations, and search warrants new text begin ; and
new text end

new text begin (5) information from the inspector general, including information listed on the inspector
general's exclusion list under section 15D.04, subdivision 1, clause (8) new text end .

(c) The commissioner must send notice of the withholding of payments within five days
of taking such action. The notice must:

(1) state that payments are being withheld according to this subdivision;

(2) set forth the general allegations related to the withholding action, except the notice
need not disclose specific information concerning an ongoing investigation;

(3) state that the withholding is for a temporary period and cite the circumstances under
which the withholding will be terminated; and

(4) inform the provider, vendor, individual, associated individual, or associated entity
of the right to submit written evidence to contest the withholding action for consideration
by the commissioner.

(d) If the commissioner 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, state
with specificity the reasons the payment withholding decision is in error, and include
documents to support the request. Within 60 days from receipt of the request, the
commissioner shall judiciously review allegations, facts, evidence available to the
commissioner, and information submitted by the provider, vendor, individual, associated
individual, or associated entity to determine whether the payment withholding should remain
in place.

(e) The commissioner shall stop withholding payments if the commissioner determines
there is insufficient evidence of fraud by the provider, vendor, individual, associated
individual, or associated entity or when legal proceedings relating to the alleged fraud are
completed, unless the commissioner has sent notice under subdivision 3 to the provider,
vendor, individual, associated individual, or associated entity.

(f) The withholding of payments is a temporary action and is not subject to appeal under
section 256.045 or chapter 14.

Sec. 5.

Minnesota Statutes 2024, section 256.01, is amended by adding a subdivision to
read:

new text begin Subd. 44. new text end

new text begin Office of the Inspector General; reports. new text end

new text begin The commissioner must submit
final investigative reports to the inspector general, serving under section 15D.01, for any
investigation conducted by the commissioner into fraud or misuse, as defined in section
15D.02, within the Medicaid program.
new text end

Sec. 6. 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 Except as exempted in article 1, section 15, subdivision
6, and Minnesota Statutes, section 15D.04, subdivision 2, duties pertaining to the
investigation of fraud, misuse, and other unlawful use of public funds in the Office 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 15D.01, certifies in writing to the commissioners of the respective
departments 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, and records shall transfer from
each department in subdivision 1 to the inspector general under Minnesota Statutes, section
15D.01, except as provided by the inspector general and as provided in article 1, section
15, subdivision 6, and Minnesota Statutes, section 15D.04, subdivision 2.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 7. 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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the inspector general under
Minnesota Statutes, section 15D.01, notifies the revisor of statutes that the Office of the
Inspector General under Minnesota Statutes, section 15D.01, has assumed responsibility
for identifying and investigating fraud, misuse, and other unlawful use of public funds in
the Department of Education.
new text end

APPENDIX

Repealed Minnesota Statutes: S0856-8

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.