The massive fraud scandal that has plagued Minnesota under Governor Tim Walz just got significantly worse. A scathing new audit released this week reveals that the state's Department of Human Services (DHS) fabricated documents after an investigation began, pointing to what Republican House Speaker Lisa DeMuth called "a culture of pervasive fraud, negligence, and deception."
The audit found that DHS distributed more than $425 million in grants to 830 organizations—primarily non-governmental groups serving people with addiction and mental health issues—without proper oversight. Auditors discovered missing progress reports, incomplete monitoring visits, and most troubling, what appeared to be backdated or newly created documentation that didn't exist before the audit commenced.
The revelation comes as federal prosecutors estimate total fraud in Minnesota's social services programs could reach $9 billion. To date, 98 individuals have been federally charged in connection with various fraud schemes, with 62 already convicted.
Congressional Hearing Exposes Years of Ignored Warnings
At a contentious House Oversight Committee hearing on January 7, Minnesota state representatives testified that Walz and his administration "willfully turned a blind eye" to credible fraud reports dating back over a decade.
Representative Kristin Robbins, chair of Minnesota's fraud prevention committee, told lawmakers that whistleblower allegations of daycare fraud go back 15 years. She alleged the Walz administration retaliated against those who raised concerns.
"Minnesotans deserve integrity from state agencies," Robbins said in her testimony. "Fabricating evidence after an audit begins is unacceptable. It obstructs oversight and prevents the state from correcting its failures."
Representative Walter Hudson testified he had "no doubt whatsoever" that Walz knew about the fraud as it occurred. He suggested the governor ignored concerns because Somali Americans represent a significant Democratic voting bloc in Minnesota—noting that the vast majority of those charged are of Somali descent.
Federal Response and Walz's Exit
The Trump administration has frozen $185 million in federal childcare funding to Minnesota, with the Department of Health and Human Services now requiring justification and photo evidence for all childcare-related payments nationwide. The Department of Homeland Security has deployed agents for door-to-door investigations, arresting approximately 1,000 illegal aliens in recent weeks.
Committee Chairman James Comer has requested all relevant Suspicious Activity Reports from the Treasury Department and called on Walz and Minnesota Attorney General Keith Ellison to testify at a public hearing scheduled for February 10. He's threatened subpoenas if they don't appear voluntarily.
On January 5, Walz announced he would not seek a third term as governor—a decision many see as directly tied to the escalating scandal.
Scale of the Fraud
Federal investigators have issued over 1,750 subpoenas, executed more than 130 search warrants, and conducted over 1,000 witness interviews. The fraud extends across multiple Medicaid programs, including:
- Feeding Our Future (over $250 million in pandemic meal fraud)
- Housing Stabilization Services
- Early Intensive Developmental and Behavioral Intervention for autistic children
- Adult day care programs
- Emergency housing assistance
The audit also revealed a blatant conflict of interest: a DHS manager approved a large grant, then later became a paid consultant for that same grantee.
While Walz has claimed his administration spent "years cracking down on fraudsters," Minnesota's independent Legislative Auditor disputed this claim in a 2024 report, concluding that the Department of Education "failed to act on warning signs" and could have legally intervened to stop fraudulent payments.
As Chairman Comer asked during the hearing: "How many children have gone hungry because fraudsters stole money intended to feed them? How many autistic children were denied services because fraudsters sent this money overseas?"
With billions in taxpayer dollars stolen and evidence mounting of deliberate cover-ups, Minnesota's fraud scandal represents one of the largest government failures in recent American history.
Source: BizPacReview.com
