A fistful of dollars
How much welfare spending is simply stolen?
In a federal courtroom in Minneapolis in early June, a jury found five of seven defendants guilty of fraud and other charges in the first trial of the “Feeding Our Future” scandal. This staggering case has already seen 18 other defendants plead guilty and be convicted, with more trials of the remaining 45 or so defendants set to take place in the coming months.
The U.S. Attorney for the District of Minnesota prosecuting the case, Andrew Luger, has revealed a shocking figure — the free-food fraud has siphoned off more than a quarter of a billion dollars from taxpayers’ pockets. Despite this, while the federal trial was still underway, Gov. Tim Walz announced a brand-new free-food program, dubbed “Summer EBT” (electronic benefits transfer), that will serve some 400,000 Minnesota school-age children, or more than one-third of the state’s total.
Summer EBT joins a legion of existing free-food programs, including (but not limited to) regular EBT, Supplemental Nutrition Assistance Program (SNAP), Women, Infants, and Children (WIC), and Aid to Families with Dependent Children (AFDC). Not to mention the original programs at issue in the Feeding case, both of which continue to operate: the Child and Adult Care Food Program (CACFP) and the Summer Food Service Program (SFSP).
Just last year, Walz teamed up with Democrats in the state legislature to expand the existing School Nutrition Program (the long-standing free and reduced-price school lunch effort) to include school breakfast and eliminate family income requirements.
Yet we are also told that demand at nonprofit food shelves and rates of “food insecurity” are at record (and rising) levels in the state. Never in Minnesota’s history have more programs and dollars been dedicated to eradicating hunger with no apparent impact.
American Experiment economist Martha Njolomole frequently writes about how overall public welfare (social service) spending is the fastest-growing budget item in state government. She documents how this category has grown from 23 percent of the total budget 25 years ago to about 30 percent (and rising) of the total budget today.
How much of this spending is reaching the intended recipients? How much is being lost to waste and outright fraud? These are fair questions that nobody seems to be asking even as the dollar amount grows — faster than the national average, faster than inflation, and faster than any underlying growth in the state’s poverty rate.
In March 2023, we asked Minnesota voters the following provocative question in our quarterly Thinking Minnesota Poll: “What percentage of state spending is wasteful? If you had to give me your best educated guess, what percentage would you say it is?”
The median answer produced by our representative sample of voters was a whopping 34 percent, or more than one-third. Even the Democrats surveyed put the figure at 22 percent.
Perhaps they’re onto something.
The question of waste and fraud should be more urgent than ever. Beginning in August 2023, Deena Winter, senior reporter of the left-leaning outlet Minnesota Reformer, has been documenting how about half of the defendants in the Feeding Our Future case operated other businesses receiving state funding.
Even earlier, on December 17, 2022, the Star Tribune documented how people indicted in the Feeding scandal were continuing to receive millions of dollars in payments from other state agencies, specifically the Department of Human Services (DHS). In the story, “Figures linked to meals fraud case continue to collect millions in daycare support,” the Star Tribune reported at the time:
The disclosures are raising new questions about the department’s diligence at rooting out fraud, which first erupted in 2018 over reports of widespread wrongdoing by daycare owners. Though some legislators praise the department for addressing weaknesses later identified by the legislative auditor, others say DHS continues to struggle with attacking potential fraud.
These businesses included efforts in childcare, adult day care, personal care assistance (PCA), and health clinics, among others on a lengthy list. In many cases, these businesses continued to operate and receive state funding even into 2024, long after the indictments were issued in the food case, as each separate state agency decided whether or not to conduct their own, separate investigations.
To highlight one example, Feeding Our Future Defendant No. 33, Anab Awad, became Guilty Plea No. 5 in the case. In November 2022, she pled guilty to stealing more than $9 million from the food program. That same day, and in the same document, she also pled guilty to unrelated Medicaid fraud charges dating from 2015 and 2016.
In the Medicaid case, Awad admitted to stealing $43,000 from the program through two local language interpreter companies. Both companies appear to still be in business, presumably without Awad’s participation.
Fraud cases in Minnesota extend well beyond the 70 individuals charged (so far) in the Feeding Our Future scandal.
In April 2022, St. Cloud grocer Hared Jibril pled guilty to federal charges of stealing more than $4 million in SNAP and WIC government benefits. Jibril also hosted a free-food distribution site but has not been charged in the Feeding case. His grocery store appears to still be in business.
In early May 2024, state Attorney General Keith Ellison charged eight people in a $3 million Medicaid fraud case involving non-emergency medical transportation (NEMT), interpreters, and other fee-for-service programs.
The previous August, Ellison charged 18 people with $11 million in Medicaid fraud involving the personal care assistance program. In December, Ellison added three more defendants to this group. One of the three newly added defendants had already been convicted of Medicaid fraud back in 2022.
Even Gov. Walz’s beloved EBT program is not immune to fraud. His DHS reported nearly $400,000 in fraud back in March. In these cases, the victims were not the taxpayers, but legitimate EBT benefit recipients who were the victims of various “card skimming” scams at retail outlets.
Earlier this year, two Minnesota residents were arrested in Los Angeles on warrants related to Minnesota EBT card skimming at retail locations.
In case you think nobody cares about the enormous waste and disppearing millions of taxpayer money happening under the nose of taxpayer-funded government agencies, a group of DHS employees has rebelled by establishing a whistleblower Twitter (X) account under the handle @Minnesota_DHS. This anonymous account claims to represent 193 current staffers at the agency. Their complaints extend beyond the public fraud cases to the general mismanagement and political cronyism they say is rife within the agency.
As previously referenced, recent public anxiety with public benefits fraud can be traced back to a childcare fraud scandal that made headlines in May 2018. A Fox 9 television report was particularly dramatic, with claims of more than $100 million of fraud against the government program and suitcases of cash leaving the country headed to the Middle East.
These headlines grabbed the public’s attention and prompted a state audit of the program. The audit, published in March 2019, could not substantiate the more lurid claims, but it did document some $6 million in court-proven cases of fraud.
The state agency overseeing the State Child Care Assistance Program (CCAP) is the Department of Human Services.
The 2019 audit into childcare fraud singled out the agency’s inspector general, a senior executive at DHS named Carolyn Ham. She was accused of burying the agency’s investigation into childcare fraud. The auditor Jim Nobles was quoted by the Star Tribune at the time:
“Fraud is a serious problem in the CCAP program.” The internal controls, he said, “are so lacking that it really isn’t that hard to steal money from that program if that’s your intent.”
After the furor died down in December 2019, Ham was cleared and quietly transferred to another senior position at the agency, where she remained for several years. According to her LinkedIn bio, Ham retired in June 2022.
Despite clearing Ham and maintaining that the agency itself had been exonerated in the affair, DHS admitted to making over $106 million in “wrongful payments” in 2019 alone, a situation the agency claimed has since been fixed.
Part of the confusion is a lack of an accepted definition of the word “fraud.” Agencies like DHS use terms such as “overbilling” to describe vendors making claims for payments they are not legally entitled to. The word “fraud” is sometimes reserved solely for situations that have already resulted in criminal convictions and prison sentences.
Taxpayers don’t care about the precise terminology or the feelings of state bureaucrats; they just want the bleeding to stop. But the subject of fraud in the state’s childcare assistance program now seems to have become a forbidden topic in media and government circles.
If the agencies won’t police themselves, and the media won’t investigate, then who will? The Office of the Legislative Auditor (OLA) is a group within the state’s legislative branch that audits executive branch agencies for effectiveness in carrying out programs and properly managing taxpayers’ money, among other duties. The OLA performs several different types of audits.
The OLA is currently working on a special report specifically examining the oversight by the state’s Department of Education of the rogue nonprofit Feeding Our Future. The report is expected to be published this year.
The childcare assistance program at DHS was the subject of a previous 64-page OLA special report in March 2019. In a 10-page appendix, the OLA documented about a dozen criminal prosecutions that had occurred during the five-year period from 2014 to 2019 and DHS’ MinnesotaCare program was reviewed in a 2015 OLA special report. DHS was the subject of an earlier special report in 2013.
In terms of regular OLA program evaluations, the auditors examined DHS operations in 2020 and 2024. The 2020 OLA report specifically examined DHS oversight of the PCA program and was updated in 2021. The one-page 2021 update noted that DHS had taken one step recommended by the OLA, but still had not implemented four other items.
The OLA conducted a performance audit of DHS’ homelessness programs in 2022, and other DHS programs in 2021, 2019, 2018, 2017, 2016 and 2015, within the past decade.
More could be done in this field; it’s a target rich environment for government watchdogs.
A September 7, 2022 editorial by the Star Tribune reviewing these past OLA reports (“DHS in trouble yet again”) offered this conclusion, which still rings true today: “Each time problems have surfaced, the department has lamented the findings and promised to do better. But the poor practices persist.”
The editors added, “These programs can be lifesavers for those in need. But it also is vital that the department provide proper oversight, lest public confidence be further eroded and those truly in need denied.”
Recently, a Star Tribune columnist offered something closer to the opposite opinion. In May 2024, Myron Medcalf wrote a column headlined, “As Feeding Our Future trial continues, will hungry kids lose support?” Medcalf argues that it’s not poor government agency performance that’s eroding public support for welfare programs, it’s the very act of holding fraudsters accountable — and it’s leaving kids hungry. He quotes the operator of a food shelf, “That’s why she [CEO of Second Harvest Heartland Allison O’Toole] said this is no time to be distracted by the proceedings in courtrooms against an organization the federal government has accused of operating with bad intentions.”
So, when is the right time to be “distracted” by holding criminals accountable?
DHS consumes nearly half of all state spending when money from the federal government is accounted for. It is by far the biggest state expenditure and continues to be the fastest growing category in the budget. In the next four years (2024-27), for example, half of all new spending will go to DHS. When looking only at the general fund budget, that number drops down slightly to 42 percent.
An expanding DHS system makes fraud even more likely as it becomes harder and more costly to oversee such high levels of spending. The Minnesota Legislature made this even worse by expanding eligibility for some welfare programs, essentially opening the welfare system to a large swath of Minnesotans.
It could be argued that these programs do serve an important purpose. Minnesota’s welfare system, however, has grown far beyond helping those in need. The mantra now seems, “if you cannot afford it, whatever it is, even just slightly, the state government will buy it for you,” be it housing, childcare, or health insurance. And “do not worry if at some point you manage to get back on your feet, we will still help you unless you tell us to stop.”
Consider this example. Due to a law passed last year, children who qualify for Medicaid before turning six years old can stay on the program until their sixth birthday. It does not matter if they become ineligible. Parents need to tell the state government to remove them from the program. But who is going to tell the state government to get their child off Medicaid because they can now afford private insurance?
Perhaps there would be more support for social service spending if taxpayers believed that the programs were actually helping the intended recipients rather than seeing their hard-earned tax dollars being funneled through a myriad of bureaucratic black holes, doled out to criminals relying on persistent unaccountability, and put toward welfare largesse that looks more like a child’s allowance than a societal response to help the truly disadvantaged.