Minnesota 2025-2026 Regular Session

Minnesota Senate Bill SF1123 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	1.1 A bill for an act
2	2	1.2 relating to state government; requiring fraud reporting; strengthening grants
3	3	1.3 management requirements; establishing a criminal penalty; amending Minnesota
4	4	1.4 Statutes 2024, sections 16B.97, subdivisions 2, 4; 16B.98, subdivisions 4, 5, 8;
5	5	1.5 16B.981, subdivisions 2, 3; 16B.991, subdivision 1; proposing coding for new law
6	6	1.6 in Minnesota Statutes, chapter 15.
7	7	1.7BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
8	8	1.8 Section 1. [15.0572] FRAUD REPORTING REQUIRED.
9	9	1.9 If an employee of a state agency has reason to suspect the existence of fraud in a program
10	10	1.10administered by the agency, the employee must immediately notify law enforcement and
11	11	1.11the chairs and ranking minority members of the house of representatives and senate
12	12	1.12committees with jurisdiction over the agency's operating budget. For purposes of this section
13	13	1.13and section 15.0574, "agency" means a department of the state designated in section 15.01
14	14	1.14and a multimember executive branch agency described in section 15.012, paragraph (a).
15	15	1.15 Sec. 2. [15.0574] ORGANIZATIONAL CHARTS POSTED.
16	16	1.16 Each state agency must prominently post on the agency's website a current organizational
17	17	1.17chart that includes the name and contact information for the commissioner, all deputy
18	18	1.18commissioners and assistant commissioners, and the head of each division or bureau within
19	19	1.19the agency.
20	20	1.20 Sec. 3. Minnesota Statutes 2024, section 16B.97, subdivision 2, is amended to read:
21	21	1.21 Subd. 2.Grants governance.The commissioner shall provide leadership and direction
22	22	1.22for policy related to grants management in Minnesota in order to foster more consistent,
23	23	1Sec. 3.
24	24	25-02163 as introduced01/14/25 REVISOR SGS/RC
25	25	SENATE
26	26	STATE OF MINNESOTA
27	27	S.F. No. 1123NINETY-FOURTH SESSION
28	28	(SENATE AUTHORS: COLEMAN)
29	29	OFFICIAL STATUSD-PGDATE
30	30	Introduction and first reading02/06/2025
31	31	Referred to State and Local Government 2.1streamlined interaction between executive agencies, funders, and grantees that will enhance
32	32	2.2access to grant opportunities and information; prevent fraud, waste, and abuse; and lead to
33	33	2.3greater program accountability and transparency. The commissioner has the duties and
34	34	2.4powers stated in this section. Executive agencies shall fully cooperate with the commissioner
35	35	2.5in the creation, management, and oversight of state grants and must do what the commissioner
36	36	2.6requires under this section. The commissioner may adopt rules to carry out grants governance,
37	37	2.7oversight, and management.
38	38	2.8 Sec. 4. Minnesota Statutes 2024, section 16B.97, subdivision 4, is amended to read:
39	39	2.9 Subd. 4.Duties.(a) The commissioner shall:
40	40	2.10 (1) create general grants management policies and procedures that are applicable to all
41	41	2.11executive agencies. The commissioner may approve exceptions to these policies and
42	42	2.12procedures for particular grant programs, however the commissioner must not approve an
43	43	2.13exception to the requirements under clause (11). Exceptions shall expire or be renewed after
44	44	2.14five years. Executive agencies shall retain management of individual grants programs;
45	45	2.15 (2) provide a central point of contact concerning statewide grants management policies
46	46	2.16and procedures;
47	47	2.17 (3) serve as a resource to executive agencies in such areas as training, evaluation,
48	48	2.18collaboration, and best practices in grants management;
49	49	2.19 (4) ensure grants management needs are considered in the development, upgrade, and
50	50	2.20use of statewide administrative systems and leverage existing technology wherever possible;
51	51	2.21 (5) oversee and approve future professional and technical service contracts and other
52	52	2.22information technology spending related to executive agency grants management systems
53	53	2.23and activities;
54	54	2.24 (6) provide a central point of contact for comments about executive agencies violating
55	55	2.25statewide grants governance policies and about fraud and, waste, and abuse in grants
56	56	2.26processes, with each comment concerning fraud reported as required under section 15.0572;
57	57	2.27 (7) forward received comments to the appropriate agency for further action, and may
58	58	2.28follow up as necessary;
59	59	2.29 (8) provide a single listing of all available executive agency competitive grant
60	60	2.30opportunities and resulting grant recipients;
61	61	2.31 (9) selectively review development and implementation of executive agency grants,
62	62	2.32policies, and practices; and
63	63	2Sec. 4.
64	64	25-02163 as introduced01/14/25 REVISOR SGS/RC 3.1 (10) selectively review executive agency compliance with best practices.; and
65	65	3.2 (11) require executive agencies, without exception, to:
66	66	3.3 (i) conduct at least one in-person, unannounced monitoring visit before final payment
67	67	3.4is made for any grant over $50,000 and at least annual in-person, unannounced monitoring
68	68	3.5visits for any grant over $250,000;
69	69	3.6 (ii) conduct a financial reconciliation of each grant project expenditure prior to
70	70	3.7disbursement for any grant over $50,000; and
71	71	3.8 (iii) withhold funds from any grantee that does not submit a progress report required
72	72	3.9under the grant agreement until the grantee submits a satisfactory report.
73	73	3.10 (b) The commissioner may determine that it is cost-effective for agencies to develop
74	74	3.11and use shared grants management technology systems. This system would be governed
75	75	3.12under section 16E.01, subdivision 3, paragraph (b).
76	76	3.13 (c) A state employee who knowingly violates a requirement imposed by the commissioner
77	77	3.14under paragraph (a), clause (11), is guilty of a misdemeanor.
78	78	3.15 Sec. 5. Minnesota Statutes 2024, section 16B.98, subdivision 4, is amended to read:
79	79	3.16 Subd. 4.Reporting of violations.A state employee who discovers evidence of violation
80	80	3.17of laws or rules governing grants is encouraged to must report the violation or suspected
81	81	3.18violation to the employee's supervisor, the commissioner or the commissioner's designee,
82	82	3.19or and the legislative auditor. The legislative auditor shall report to the Legislative Audit
83	83	3.20Commission if there are multiple complaints about the same agency. The auditor's report
84	84	3.21to the Legislative Audit Commission under this section must disclose only the number and
85	85	3.22type of violations alleged. An employee making a good faith report under this section has
86	86	3.23the protections provided for under section 181.932, prohibiting the employer from
87	87	3.24discriminating against the employee.
88	88	3.25 Sec. 6. Minnesota Statutes 2024, section 16B.98, subdivision 5, is amended to read:
89	89	3.26 Subd. 5.Creation and validity of grant agreements.(a) A grant agreement and
90	90	3.27amendments are not valid and do not bind unless:
91	91	3.28 (1) the grant agreement and amendments have been executed by the head of the agency
92	92	3.29or a delegate who is party to the grant;
93	93	3.30 (2) the grant agreement and amendments have been approved by the commissioner;
94	94	3Sec. 6.
95	95	25-02163 as introduced01/14/25 REVISOR SGS/RC 4.1 (3) the accounting system shows an encumbrance for the amount of the grant in
96	96	4.2accordance with policy approved by the commissioner except as provided in subdivision
97	97	4.311; and
98	98	4.4 (4) the grant agreement and amendments include an effective date that references either
99	99	4.5section 16C.05, subdivision 2, or 16B.98, subdivisions 5 and 7, as determined by the granting
100	100	4.6agency.
101	101	4.7 (b) The combined grant agreement and amendments must not exceed five years without
102	102	4.8specific, written approval by the commissioner according to established policy, procedures,
103	103	4.9and standards, or unless the commissioner determines that a longer duration is in the best
104	104	4.10interest of the state.
105	105	4.11 (c) A fully executed copy of the grant agreement with all amendments and other required
106	106	4.12records relating to the grant must be kept on file at the granting agency for a time equal to
107	107	4.13that required of grantees in subdivision 8.
108	108	4.14 (d) Grant agreements must comply with policies established by the commissioner for
109	109	4.15minimum grant agreement standards and practices. Grant agreements must require the
110	110	4.16grantee to prominently post on the grantee's website a current organizational chart for the
111	111	4.17duration of the grant agreement.
112	112	4.18 (e) The attorney general may periodically review and evaluate a sample of state agency
113	113	4.19grants to ensure compliance with applicable laws.
114	114	4.20 Sec. 7. Minnesota Statutes 2024, section 16B.98, subdivision 8, is amended to read:
115	115	4.21 Subd. 8.Audit.(a) A grant agreement made by an executive agency must include an
116	116	4.22audit clause that provides that the books, records, documents, internal controls, and
117	117	4.23accounting procedures and practices of the grantee or other party that are relevant to the
118	118	4.24grant or transaction are subject to examination by the commissioner, the granting agency
119	119	4.25and either the legislative auditor or the state auditor, as appropriate, for a minimum of six
120	120	4.26years from the grant agreement end date, receipt and approval of all final reports, or the
121	121	4.27required period of time to satisfy all state and program retention requirements, whichever
122	122	4.28is later. If a grant agreement does not include an express audit clause, the audit authority
123	123	4.29under this subdivision is implied.
124	124	4.30 (b) If the granting agency is a local unit of government, and the governing body of the
125	125	4.31local unit of government requests that the state auditor examine the books, records,
126	126	4.32documents, internal controls, and accounting procedures and practices of the grantee or
127	127	4.33other party according to this subdivision, the granting agency shall be liable for the cost of
128	128	4Sec. 7.
129	129	25-02163 as introduced01/14/25 REVISOR SGS/RC 5.1the examination. If the granting agency is a local unit of government, and the grantee or
130	130	5.2other party requests that the state auditor examine all books, records, documents, internal
131	131	5.3controls, and accounting procedures and practices related to the grant, the grantee or other
132	132	5.4party that requested the examination shall be liable for the cost of the examination.
133	133	5.5 Sec. 8. Minnesota Statutes 2024, section 16B.981, subdivision 2, is amended to read:
134	134	5.6 Subd. 2.Financial information required; determination of ability to perform.For
135	135	5.7grants of $50,000 or more and subject to sections 16B.97 and 16B.98, before an agency
136	136	5.8awards a competitive, legislatively named, single-source, or sole-source grant, the agency
137	137	5.9must complete a preaward risk assessment to assess the risk that a potential grantee cannot
138	138	5.10or would not perform the required duties. In making this assessment, the agency must review
139	139	5.11the following information as applicable:
140	140	5.12 (1) the potential grantee's history of performing duties similar to those required by the
141	141	5.13grant, whether the grant requires the potential grantee to perform services at a significantly
142	142	5.14increased scale, and whether the grant will require significant changes to the operation of
143	143	5.15the potential grantee's organization;
144	144	5.16 (2) for a potential grantee that is a nonprofit organization, the potential grantee's most
145	145	5.17recent Form 990 or Form 990-EZ filed with the Internal Revenue Service. If the potential
146	146	5.18grantee has not been in existence long enough or is not required to file Form 990 or Form
147	147	5.19990-EZ, the potential grantee must demonstrate to the agency's satisfaction that the potential
148	148	5.20grantee is exempt and must instead submit the potential grantee's most recent board-reviewed
149	149	5.21financial statements and documentation of appropriate internal controls or, if there is no
150	150	5.22such board, by the applicant's managing group. At a minimum, the potential grantee's internal
151	151	5.23controls must require the segregation of duties concerning the authorization, disbursement,
152	152	5.24and recording of expenditures;
153	153	5.25 (3) for a potential grantee that is a for-profit business, the potential grantee's most recent
154	154	5.26federal and state tax returns, current financial statements, certification that the business is
155	155	5.27not under bankruptcy proceedings, and disclosure of any liens on its assets. If a business
156	156	5.28has not been in business long enough to have a tax return, the grantee must demonstrate to
157	157	5.29the agency's satisfaction that the grantee has appropriate internal financial controls. At a
158	158	5.30minimum, the potential grantee's internal controls must require the segregation of duties
159	159	5.31concerning the authorization, disbursement, and recording of expenditures;
160	160	5.32 (4) evidence of good standing with the secretary of state under chapter 317A, or other
161	161	5.33applicable law;
162	162	5Sec. 8.
163	163	25-02163 as introduced01/14/25 REVISOR SGS/RC 6.1 (5) if the potential grantee is required to complete an audit under section 309.53,
164	164	6.2subdivision 3, the potential grantee's most recent audit report performed by an independent
165	165	6.3third party in accordance with generally accepted accounting principles; and
166	166	6.4 (6) certification, provided by the potential grantee, that none of its current principals
167	167	6.5have been convicted of a felony financial crime in the last ten years. For this section, a
168	168	6.6principal is defined as a public official, a board member, or staff with the authority to access
169	169	6.7funds provided by this agency or determine how those funds are used.
170	170	6.8 Sec. 9. Minnesota Statutes 2024, section 16B.981, subdivision 3, is amended to read:
171	171	6.9 Subd. 3.Additional measures for some grantees.The agency may must require
172	172	6.10additional information and may provide enhanced oversight for grantees that have not
173	173	6.11previously received state or federal grants for similar amounts or similar duties and have
174	174	6.12not yet demonstrated the ability to perform the duties required under the grant on the scale
175	175	6.13required. For nonprofit organizations, this additional information must include but is not
176	176	6.14limited to documented employee compensation agreements for each principal and a detailed
177	177	6.15payroll report that includes total compensation, by type, paid to each principal in each of
178	178	6.16the previous three years. Before awarding a grant, the agency must inquire about
179	179	6.17compensation that, in the agency's estimation, is in excess of the amount customarily paid
180	180	6.18to those in comparable positions.
181	181	6.19 Sec. 10. Minnesota Statutes 2024, section 16B.991, subdivision 1, is amended to read:
182	182	6.20 Subdivision 1.Criminal charge or conviction.Each grant agreement subject to sections
183	183	6.2116B.97 and 16B.98 must provide that the agreement will immediately be terminated
184	184	6.22suspended if the recipient is convicted of charged with a criminal offense relating to a state
185	185	6.23grant agreement and terminated if the recipient is convicted.
186	186	6.24 Sec. 11. CONFORMING CHANGES TO GRANTS POLICIES.
187	187	6.25 The commissioner of administration must update the commissioner's grants management
188	188	6.26policies and procedures as necessary to conform with this act.
189	189	6.27 Sec. 12. EFFECTIVE DATE.
190	190	6.28 This act is effective the day following final enactment.
191	191	6Sec. 12.
192	192	25-02163 as introduced01/14/25 REVISOR SGS/RC