Minnesota House approves statewide Office of Inspector General to fight fraud

After months of back and forth, Republicans and Democrats in both chambers of the Minnesota Legislature found a way forward to establish a new Office of Inspector General to fight fraud and prevent the theft of taxpayer money in the first place.

The House approved the bill Thursday with nearly unanimous support, 127-5, after the Senate approved a similar measure last year. A bipartisan group met for months to sort out differences and come up with a deal that would have enough votes to pass as the state grapples with the tens of millions of dollars stolen from public programs. 

The new independent watchdog, which would be led by a nonpartisan person who is subject to three-fifths majority Senate confirmation, is tasked with conducting investigations, recommending changes to state law, instructing agencies to withhold payments to providers for credible allegations of fraud and maintaining a tip line for reports of misuse of funds.

It also empowers the office to hire staff for a law enforcement division that can conduct criminal investigations and make arrests.

"We had a shared goal from the beginning, which is eliminating fraud here in Minnesota. At times we had different ideas about how exactly to get there, but I think in the end we landed on a very strong product," said Rep. Matt Norris, DFL-Blaine, the lead Democrat author in the House.

The Senate next week is poised to pass the legislation approved Thursday in the House — which is a culmination of a small working group of both parties in both chambers — and then that would tee it up for DFL Gov. Tim Walz to sign into law, which he is expected to do.

"This isn't a silver bullet. This isn't going to solve everything, but this is a big step towards creating a culture here in Minnesota where fraud is no longer acceptable," said Sen. Michael Kreun, R-Blaine.

But starting a new agency from scratch doesn't come cheap. It could cost $3 million to $6 million to set up, and upwards of $12 million per year on an ongoing basis for the office to function and how other agencies will interact with it.

But Republicans and Democrats both agree the price tag is worth it if the return on investment is saving millions of taxpayer money from fraud in the future. 

A lot of the decisions about funding will be left for future Legislatures to decide. There would be even more costs associated with standing up a law enforcement division at the inspector general's discretion. 

Sen. Heather Gustafson, DFL-Vadnais Heights, called the measure, "the most significant anti-fraud piece of legislation to pass in our generation," but admitted she does worry about lawmakers funding the office's needs in future budget years. 

"I'm vice chair of [the] state local government [committee]. That is what we do, right? You get the Office of the Attorney General with MMB — you have all of the state agencies that come and ask for budget requests based on what they need, and that changes year to year. So this would be no different," she said.

When would the Office of Inspector General be operational?

Gustafson said a bipartisan selection committee to choose candidates to be the next inspector general would start in August. The governor would then choose from that list, and then there would be an appointment to the role subject to Senate confirmation by Feb. 1, 2027. 

Rep. Patti Anderson, the Republican lead in the House, suggested it would take over a year for the office to be at full strength as intended, but the inspector general can start hiring some staff next spring and some employees are moving from the Department of Education to the Office of Inspector General by fall.

"Then the following January, that's when they'll be able to start law enforcement," Anderson said. 

The Legislature is also working through a number of other proposals designed to stop fraud before session ends May 18, including making it easier for some state agencies to withhold payments.