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