Legislative auditor: Minnesota fraud will get worse before it gets better

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Minnesota’s Legislative Auditor Judy Randall warned that reports of fraud in public programs would likely get worse before they got better. She was right.

Late last month, the state Department of Human Services (DHS) stopped payments to almost 30 providers and affiliates in Minnesota’s Integrated Community Supports System. Inspectors found providers billing for Medicaid-funded disability services they never delivered.

Also last month, a woman who was already raking in cash from the illegal Feeding Our Future scheme was charged with trying to fraudulently collect $14 million for autism treatment. And those federal allegations came a week after eight were indicted in a massive scheme to defraud the state’s Medicaid-funded Housing Stabilization Services program.

It’s getting hard to keep the scorecard straight. We’ve kept hearing “about a billion stolen.” At this point, who knows? Somebody, maybe a Republican running against Gov. Tim Walz, needs to create a fraud tracker to show how much money is alleged to have been looted from the state.

Who knew so many millions, possibly billions, could be stolen and spent so quickly and without much consequence? While federal prosecutors go about the business of trying to hold some of the fraudsters criminally accountable, I wondered how Randall was feeling about the attempts at prevention across state agencies.

As the legislative auditor, Randall is an independent watchdog appointed by both Democrats and Republicans in the Legislature. Her office conducts routine, in-depth audits on state agencies. The Office of the Legislative Auditor has enjoyed a sterling reputation for decades.

“The legislative auditor’s office is, I think, generally considered the most, if not one of the most, respected” in the state, said Sen. Ann Rest, DFL-New Hope and the chair of the committee that oversees Randall’s office.

Randall meets regularly with legislators from both parties, but she has never spoken with Gov. Tim Walz. She and her staff have a “just the facts” approach to their work that eschews partisan attacks or political whims. That’s why it was notable when, in July 2024, she issued a sharp critique of the dismissive response of Walz’s state agencies to her findings.

“I have seen increasing rejection of our findings and recommendations. Or denial or dismissiveness or excuses,” Randall told the Minnesota Star Tribune. “There’s definitely a shoot-the-messenger feeling.”

Reflecting on the statement now, Randall said, “it felt like an unusual amount of pushback” and defensiveness from agencies. “I always thought we had shared goals.”

Randall said she’s seen progress and that she is, by her own admission, uncharacteristically optimistic about fraud-prevention efforts.

“Some of the necessary pieces are starting to get put into place,” she said.

Agency commissioners are now looking for fraud in ways they weren’t, and her own office has made it easier to report suspicious behavior. She also credited Walz and the Legislature for creating a financial crimes and fraud unit within the Bureau of Criminal Apprehension.

The real work, though, is prevention.

“Because of all these things, I would expect more fraud to get identified,” she said. That’s what she means when she says it will get worse before it gets better. Those are the headlines — alleged perpetrators facing charges.

The ultimate goal isn’t to catch fraud after the fact, it’s to create an environment that doesn’t allow it to happen in the first place. “It’s cheaper to prevent it,” Randall said. “That’s what agencies need to be focusing on now.”

The state needs to be focused on locking the front door. Think of it like a would-be burglar combing a neighborhood, grabbing door handles, testing the locks for easy, unsecured entry. “It starts very, very small,” Randall said.

It’s best to discourage the burglars from even trying the doorknobs. When it comes to the foundational goal of locking the front doors, Randall said, there’s room for improvement. She’s increasingly hearing from whistleblowers about concerns, and concedes, “I’m not sure yet that all of these internal controls are where they need to be.”

Some of this isn’t complicated. While it admittedly sounds mundane, part of the process of curbing fraud means paying closer attention and sharing information.

A new law allows state agencies to share credible allegations of fraud and the names of bad actors. Until recently, data privacy laws prevented such cross-agency sharing.

“I believe that government can do good things,” Randall said, but “the more you hear about fraud and government not working well, you lose faith that it can do good things.”

Here’s the blunt truth: Fraudsters evolve quickly. They’re already testing new doors. Government agencies, meanwhile, are still fumbling with deadbolts.

Rather than finger-pointing and blaming, Randall is hoping for a willingness to work together to attack the problem. “It doesn’t feel like such an unreasonable thing,” she said.

Cooperation and sharing are baseline behaviors we should expect from our public leaders as the fraudsters quickly adapt their tactics in search of new opportunities to exploit.