A program created to help Minnesota's 20,000 firefighters cope with trauma and illness lacked meaningful financial oversight and controls, according to a Legislative Auditor's report released Thursday.

In some instances, the Hometown Heroes Assistance Program received grants as advances rather than reimbursements, the audit said. The audit also found that a state deputy fire marshal improperly received more than $11,000 to conduct training programs and a nonprofit received a partly forgivable $1 million loan to pay its bills.

"We found that the Department of Public Safety (DPS) did not adequately manage the Hometown Heroes grant, particularly in the grant's first year," auditors wrote.

In 2021, the Legislature created the Hometown Heroes program and directed the Public Safety commissioner to award a grant to the Minnesota Firefighter Initiative (MnFIRE) to administer the program. MnFIRE, a private nonprofit created in 2016, advocates for firefighter health.

Hometown Heroes, which receives $4 million a year from the state, aims to support firefighters diagnosed with a critical illness on or after Aug. 1, 2021. The program also provides psychotherapy to firefighters suffering emotional trauma.

The audit, which began in February, grew out of a whistleblower's complaint in late 2022.

The Office of the Legislative Auditor sought to determine whether the Department of Public Safety had properly managed the grant, whether MnFIRE had used proper procurement practices and whether the money had been used for the appropriate purpose.

Auditors went further, however, after becoming concerned about how the public safety agency had directed $1 million in state money from the Fire Safety Account to MnFIRE.

During a hearing on the report Thursday, several legislators criticized the lack of oversight. Public Safety Commissioner Bob Jacobson, who took office in January and wasn't in charge when the problems occurred, sought to reassure them, saying his department has already made changes.

"Trust me," Jacobson said. "This will be a teachable moment of monumental importance to us in the Department of Public Safety."

Jacobson also said the department has contracted for a second outside audit and — at the urging of legislators — agreed to share the report when it's complete.

The audit found ethical problems involving Chief Deputy Fire Marshal Amanda Swenson, who was paid by MnFIRE $11,429 between December 2018 and this March for travel time and teaching sessions on trauma and illness. She was paid between $50 to $70 an hour.

Swenson violated state ethical policies in several ways because she at least indirectly oversaw the grants to MnFIRE, the audit said.

Also, state law generally prohibits state employees from receiving nonstate compensation for work related to their state duties. The audit said Swenson's teaching appeared to be related to her state work — a violation of the law.

Swenson told the auditors she had spoken to retired State Fire Marshal James Smith multiple times and he told her the teaching did not relate to her state work because health and wellness weren't part of her duties. The auditors didn't speak with Smith before he retired, but said if he gave that advice, it was mistaken.

"As a general rule, state employees should not put themselves in situations that may constitute conflicts of interest," the audit said.

Jacobson said Swenson offered to repay the money and served a one-day unpaid suspension. "She has been completely cooperative," he said. "She has been quite impacted by the mistakes she has made. She has acknowledged them. She has taken responsibility for them."

Even more troubling to legislators was the Department of Public Safety's direction of Fire Safety Account money to MnFIRE.

The Fire Safety Account is funded by surcharges on homeowners' insurance and commercial fire policies. The Legislature decides how the money is spent based on recommendations from the Fire Safety Advisory Committee.

The audit, however, found that the Advisory Committee did not follow state law for distribution of grants. The audit was especially concerned about a $1 million grant to MnFIRE in August 2022 so the nonprofit could pay its bills. Only partial repayment was required — $600,000 by June 30. Former Public Safety Commissioner John Harrington oversaw the arrangement, the audit said.

MnFIRE repaid $300,000 in June and another $300,000 on Aug. 14, the audit said. While the use of the funds was appropriate, the lack of a contract and oversight was not, the audit said.

Auditors urged the Legislature to clarify its intent for the use of Fire Safety Account money by nongovernmental organizations.

Rep. Duane Quam, R-Byron, called the $1 million partial loan extraordinary. "I know a lot of people out there that need help," he said. "That can help a lot of people."

He asked how the organization could fall so far behind. "How can you be a million dollars in arrears if you've been keeping your checkbook up to date?" Quam said.

MnFIRE president and founder George Esbensen said the program is having an impact. "State dollars are being channeled directly to firefighters who desperately need this support," he said.

Asked what sort of training the organization received to handle grant money, Esbensen said virtually nothing from the state, but they had received information about federal money.

He said, however, that the process has changed significantly since the state fire marshal's office began administering the grant in the second year. "When there is lack of clarity, people are getting back to us," he said.

Minnesota has more than 770 fire departments with nearly 20,000 firefighters. More than 97% of them are volunteer.