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A new state audit report raises concerns over the way the Minnesota Department of Human Services approached investigations into allegations of kickbacks for one of its programs, saying the agency could have been more aggressive in use of its authority.

The report from the Office of the Legislative Auditor found that DHS had more authority than it believed to take action on entities alleged to have engaged in kickbacks in the Early Intensive Development and Behavioral program. The program offers services for young people with autism spectrum disorder and has seen rapid growth in costs over the past five years, raising the possibility of fraudulent service claims.

While auditors agreed that the state agency’s Office of Inspector General “took appropriate actions to investigate” and reached proper final conclusions in a set of complaints, the report says the rules for handling cases should be rewritten to make clear that payments can be paused while probes are active. 

“DHS or the Legislature still needs to take some steps to ensure that DHS has the full complement of tools available to it to protect taxpayer funds,” Deputy Legislative Auditor Katherine Theisen said in a phone interview Tuesday.

In three of the 25 complaints the auditors looked at, they found that DHS asserted it did not have the authority to investigate allegations of kickbacks but in fact did have that power.

“We disagree that DHS did not have the ability to act upon allegations of kickbacks without legislative changes,” the OLA report says. “Instead, we identified several ways DHS could have utilized its existing authority to address allegations of kickbacks. Further, we believe additional action is needed to ensure DHS has authority to withhold or reduce payments to providers on the basis of credible allegations of kickbacks alone.”

The OLA report says legislation adopted in 2025 added the explicit authority to sanction.

The report says that DHS has a decades old error in its rules that limited the department's ability to suspend payments while investigating kickbacks.

The DHS inspector general, James Clark, responded to the report by writing in a letter that the department is seeking legislative clarity on how fraud and kickback procedures interact.

“We cannot achieve this alone, and strive to work in partnership with others to strengthen our controls against fraud, waste and abuse,” Clark wrote, outlining proposals before the Legislature this year to tighten up controls.

Clark said if a new law is passed, it would take effect in August. Barring that, a rulemaking process would start but could take up to two years to complete if not put on an expedited track.

The report was requested shortly after the FBI began investigating fraud in that program in December 2024. That coincided with a search of Smart Therapy, a Minneapolis business that registered as an autism treatment program. Smart Therapy’s owner was charged in September for allegedly stealing $14 million in state program funds for services for young people with autism spectrum disorder. 

Asha Farhan Assan, 28, the owner, was also charged in the Feeding Our Future investigation. Prosecutors said in September that the two schemes are connected.

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In the move to clamp down on fraud, a new state audit says law changes should make clearer that payments can be paused during kickback probes.

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