Governor Tim Walz assured Minnesota nonprofit leaders Friday that new grant oversight measures will protect legitimate organizations.
Walz recently proposed anti-fraud law changes and more scrutiny of grants. His plan comes after federal prosecutors last year charged 50 people allegedly connected to the group Feeding Our Future with stealing $250 million from government-run child nutrition programs.
“Feeding Our Future was not a nonprofit, Walz said. “What they were was a criminal organization fronted as a nonprofit to try and benefit themselves. To make the implication this is all nonprofits is simply unacceptable.”
The DFL governor spoke by Zoom to a Minnesota Council of Nonprofits legislative session preview meeting.
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His plan calls for more internal controls, the addition of grant inspectors at key agencies, and bolstering criminal investigations where wrongdoing is suspected.
Minnesota nonprofit leaders say they support adding more integrity to the system, but extra paperwork and grant administration costs would be counterproductive.
“None of those things should make it more difficult for legitimate nonprofits to get out the resources that we need to help people,” Walz added.
Marie Ellis, public policy director for the nonprofits umbrella group, said she sees a consensus forming.
“Yes, we are absolutely intolerant of fraud. It takes away trust from the community. We need trust from the community. That’s just bottom line,” she said. “Bottom line. Easy.”
In an earlier panel, also hosted by the Minnesota Council of Nonprofits, Republican lawmakers said they too want to add safeguards but are sensitive to concerns about weighing down legitimate entities.
Sen. Jim Abeler, R-Anoka, said the last thing lawmakers should do is add administration bloat as they build in more accountability.
“The hippocratic oath, above all do no harm to the good things we want to do. The last thing we need is to have one more layer of reports no one will read and we’ve accomplished nothing," Abeler said. "Let's not make it hard to get the money. Let's make sure you do what you're supposed to do with it.”
In the sprawling criminal case, federal prosecutors argue that dozens of defendants set up shell companies to steal and launder funds from two U.S. Department of Agriculture child nutrition programs that the Minnesota Department of Education administers on the state level.
According to court documents, the group took advantage of rule waivers instituted during the COVID-19 shutdown that allowed restaurants, and not just schools and child care centers, to serve meals to children.
Authorities say the conspirators put fictitious children’s names on meal rosters and submitted fraudulent invoices to skim the cash, which they spent on luxury goods, jewelry, and real estate in the United States and overseas. Minnesota U.S. Attorney Andy Luger described the scheme as the nation’s largest COVID-19-related fraud.
Aimee Bock, 42, the founder and executive director of Feeding our Future, is alleged to have been the group’s ringleader. After MDE officials grew suspicious of the organization’s rapid growth, they began denying its meal site applications. In response, Bock filed a lawsuit accusing the agency of discrimination.
Though five people have pleaded guilty in the case, Bock, like the majority of her co-defendants, pleaded not guilty to charges including wire fraud and bribery after a grand jury returned its indictments in September.
Feeding our Future’s board shut down the organization early last year, soon after federal agents searched two dozen homes and offices tied to the alleged perpetrators.
Authorities also seized $50 million in assets, including more than a dozen pieces of real estate, allegedly purchased with the stolen taxpayer money.
On Dec. 29, U.S. District Judge Susan Richard Nelson approved the sale of three Minneapolis properties, including two commercial buildings on Lake St. and a nearby lot on 3rd Ave. S. owned by three of the defendants.
Court filings indicate that buyers have offered $4.9 million total for the three properties. Nelson ordered that any money left over after the mortgages and other expenses are paid off be held in a government-controlled account as the case moves forward.