The state's legislative auditor says the Minnesota agency charged with issuing COVID-era front-line worker checks didn't comply with some requirements for the program, resulting in payments going to some individuals who were ineligible and to others whose eligibility couldn't be confirmed.

The Office of the Legislative Auditor's report on the Minnesota Frontline Worker Pay Program, released Tuesday, found the Department of Labor and Industry didn't verify hours and in-person work requirements to be eligible for the payment, relying on an employee's self-reported work details.

Auditors also found some fraudulently received payments, including people who used the names of individuals who died before the application window opened.

"This program was set up as a zero-sum game with a fixed amount of state funding ... to be divided equally among all eligible applicants. The more applicants were approved, the less each applicant received," said Legislative Auditor Judy Randall. "Each ineligible applicant who receives payment necessarily reduced the amount of the payment that eligible applicants received."

The Legislative Auditor's Office sampled a pool of several hundred applicants and estimated that roughly 40% of the more than 1 million people who received payments of $487 through the program were either ineligible or their eligibility could not be confirmed, with the latter making up most of the 40%.

The report also said the Department of Revenue did not verify adjusted gross income requirements for all applicants.

The agencies pushed back on the report's findings, noting the payments were more than a year late to front-line workers and the Legislature designed the program to favor expediency over stringent verification that would have caused further delays.

"The Legislature fully considered the risk of this front-line worker program and chose to proceed knowing some risk exists," said Department of Labor and Industry Commissioner Nicole Blissenbach, adding the law didn't require the department to verify an employee's self-reported information.

The Legislature passed the frontline worker program in 2022 after two sessions of debate. Legislators agreed to set aside $500 million for workers who put themselves most at risk by logging at least 120 hours of in-person work in close proximity to people outside their home between March 15, 2020 and June 30, 2021.

Eligible workers included those who met income limits and worked in health care, the courts, child care, public schools, retail, food services, public transit and manufacturing. The state was flooded with applications, ultimately shrinking the total size of checks to meet the need.

Roughly 85% of those who applied received a payment, according to the Legislative Auditor's Office, but some of those applicants were nonresidents, used the names of deceased individuals or applied with so-called "disposable emails," which could be used temporarily to commit fraud. Others didn't meet the hours required or didn't work with people outside of the home.

The Auditor's Office said the Department of Employment and Economic Development (DEED) complied with the program requirements.

The auditor recommended that the departments of Revenue and Labor go back and determine whether applicants whose eligibility couldn't be determined at the time should have received payments. It was also recommended that Revenue recoup payments made to those who fraudulently received a check.

"The Legislature should consider the amount of risk the state is willing to accept when establishing programs quickly and with eligibility conditions that rely on self-attestation," the report added.

Rep. Emma Greenman, DFL-Minneapolis, said the Legislature spent two years debating the program and intentionally designed it to make sure workers who put their health and safety on the line didn't have to wait any longer. At the time the legislation was passed, Labor Department officials testified they wouldn't be able to verify all self-reported employee data.

"There was an urgency that everyone around the table felt about getting the money to the folks who needed it quickly and feeling like we were a year behind," Greenman said.

But Senate Tax Chair Ann Rest, DFL-New Hope, said she was frustrated by the fact taxpayers ultimately had to foot the bill for some fraud.

"Something was let slip through that should have been an easy enough thing to do as brushing your teeth in the morning," Rest said. "We were in times of turmoil but that does not excuse our carelessness with regards to the burden we are placing on the taxpayer."