Breaking down findings of Minnesota Department of Education audit over Feeding our Future fraud

[MUSIC PLAYING] NINA MOINI: A report out this morning from the Minnesota legislative auditor's office says, quote, "actions and inactions by the Minnesota Department of Education created opportunities for fraud in two taxpayer-funded child-nutrition programs." The report comes in response to federal criminal charges against dozens of people connected to the Twin Cities nonprofit Feeding Our Future. They're accused of stealing $250 million by submitting falsified meal reimbursement requests.

Reporter Matt Sepic has been following the criminal cases and joins us now with a look at the legislative auditor's review. Hi, Matt.

MATT SEPIC: Hi, Nina.

NINA MOINI: So, Matt, what were some of the key findings that stood out to you?

MATT SEPIC: Well, this alleged fraud scheme for which dozens of people have been charged in federal court started in late 2020 during the pandemic. It really took off in 2021 as the group filed claims for millions of meals that were never served. But the legislative auditor said today that MDE began receiving complaints about Feeding Our Future as early as mid 2018. The report says MDE's complaint-investigation procedures were inadequate and, in some cases, quote, "MDE inappropriately asked Feeding Our Future to investigate complaints about itself."

It also highlights some staggering payouts, big red flags for fraud that federal prosecutors had noted previously. In April of 2021 alone, NINA MOINI, the nonprofit claimed to have served nearly 12 million meals and snacks to kids, and MDE paid Feeding Our Future $32 million-- that's for just one month-- and is 87 times more than the nonprofit received from the state in April of 2020 a year prior.

NINA MOINI: OK, and prosecutors in the criminal case have said that the defendants exploited rule waivers during the pandemic. What does the report say about that?

MATT SEPIC: Well, these rule waivers were really at the heart of the alleged fraud. They were from the US Department of Agriculture, which oversees the programs nationally, and were meant to give meal sites flexibility in terms of how they served food and to whom, just to keep people fed at a time of major economic upheaval while maintaining social distancing at the same time. The days of kids sitting together at big tables in a YMCA or child-care center were over, at least temporarily, during the pandemic.

The USDA allowed food-service sites to bundle meals and snacks instead of serving them ready to eat in those compartmentalized trays. The agency also set aside some on-site monitoring requirements for meal sites. The waivers, though, still required MDE, which manages the food programs on the state level, to have some sort of plan to hold meal sites accountable, but the legislative auditor says, quote, "MDE had no such plan."

The report adds that despite having the authority to do so under federal regulations, MDE could not show that it ever visited any of Feeding Our Future's sites in person during the pandemic. The auditor says it was MDE's choices about staffing, quote, "that made monitoring waivers a source of reduced oversight." It wasn't the waivers themselves.

NINA MOINI: OK, and what does the legislative auditor's review say about how MDE handled complaints about Feeding Our Future?

MATT SEPIC: As I mentioned earlier, these complaints predate the pandemic. They included allegations that Feeding Our Future operated sites without property owners' permission, ran messy and haphazard food-distribution processes, and demanded kickbacks from vendors. The auditor says MDE's first step in investigating the complaints was actually to share those complaints with Feeding Our Future, and the agency relied on Executive Director Aimee Bock, though she's not named in the report specifically, to determine whether the complaints against her nonprofit were valid.

The auditor says MDE, quote, "had reason to doubt Feeding Our Future's trustworthiness but continued to ask the nonprofit to resolve complaints about itself." The department also [INAUDIBLE]-- assigned, rather, investigative duties to child-nutrition program staff at MDE instead of investigators who were trained to look into these things.

NINA MOINI: Sure. So what has been MDE's response to this report?

MATT SEPIC: Well, part of its response is included in the report itself. Education Commissioner Willie Jett says he, quote, "disputes" the OLA's characterization of MDE's oversight which, quote, "met applicable standards" and MDE made effective referrals to law enforcement. Jett goes on to say that the, quote, "responsibility for this flagrant fraud lies with the indicted and convicted fraudsters."

MDE official Emily Honer testified at the first Feeding Our Future trial in federal court that she went to the FBI in mid-2021 after not having any luck with the USDA's inspector general, but it wasn't until January of 2022 that the millions of dollars in payouts came to a screeching halt. That's because the FBI raided Feeding Our Future's offices and a judge unsealed the search warrants, effectively making details of the federal investigation public.

Now, we're also hearing reaction today from some state lawmakers. At a news conference this morning, Senate Republicans said that MDE's response was a failure and the department's leaders need to be held accountable. Here is Senate Minority Leader Mark Johnson.

MARK JOHNSON: You can't just let $250 million go out fraudulently and expect no consequences to happen. Commissioners usually lose jobs over this, and yet two commissioners have left MDE with glowing reviews.

MATT SEPIC: We're expected to hear more in about 45 minutes from Legislative Auditor Judy Randall. She is presenting the report to legislators at the state Capitol, beginning at 1 o'clock.

NINA MOINI: Matt Sepic, thank you for that update. We know you'll be there this afternoon.

MATT SEPIC: You're welcome.

NINA MOINI: That's MPR News reporter Matt Sepic. You'll hear the latest from that press conference he mentioned this afternoon on All Things Considered, starting at 3:00.