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Why there’s nothing more partisan at the Minnesota Legislature than a nonpartisan audit

The Office of the Legislative Auditor is nonpartisan and independent. Sometimes that means it can function as an honest broker in a highly politicized Capitol. But sometimes it just means there’s something for both sides to seize upon. 

State Rep. Mary Franson
State Rep. Mary Franson speaking during last week's press conference, as state Sen. Mark Koran, far left, and state Rep. Nick Zerwas, behind Franson, look on.
MinnPost photo by Peter Callaghan

During a  press conference called last week in response to a new report issued by the Legislative Auditor regarding allegations of fraud in the state’s Child Care Assistance Program, Republican lawmakers were asked about “suitcases full of cash.”

The reference was to the most sensational and inflammatory allegation in a TV news report from last May about CCAP, which provides financial assistance for low-income families to pay for child care. The FOX 9 report alleged that money fraudulently paid to some child care centers might have flowed to terror organizations via suitcases of cash on board jetliners leaving MSP for Somalia.

Leaders in the Somali community objected, not just because the story delivered no proof of a connection to terrorism, but because it fed anti-Somali and anti-Muslim rhetoric that would only grow more intense during the summer and fall political campaigns.

The Legislative Auditor’s report found no such connection between CCAP and terrorists. Even so, it did find plenty of other problems with the $250 million program, including evidence that fraud is prevalent.

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So, Republicans were asked, were they going to stop talking about suitcases?


Since there is fraud in the program, went the argument, and since Somali-Americans in Minnesota send money to relatives, and since some of that money is sent in cash because of banking restrictions, and since some of that money could possibly be siphoned by terror-connected organizations in Somalia, the allegations could remain part of the conversation.

“What the report says is, they’re unable to confirm that this dollar went from this fraud to this suitcase,” said Rep. Nick Zerwas, R-Elk River. “They’re not saying it’s not happening. They’re saying that because they can’t prove it.”

Something for everyone?

The Office of the Legislative Auditor is nonpartisan and independent. Sometimes that means its reports have the credibility to bridge divides in a highly politicized Capitol. Sometimes that means the reports simply amplify the partisanship, offering enough information for both sides to quote and highlight (or ignore and downplay).

That was the case with the CCAP audit. Republicans focused on the warnings of fraud and abuse — and mostly ignored the dismissal of the money-to-terrorists charge. DFLers, meanwhile, highlighted the refutation of the terrorist angle while paying less attention to concerns over fraud that seem to be most prevalent in large, urban centers primarily aimed at serving immigrant children.

For Republicans, the child-care-subsidy-to-terrorist charge was the most provocative element of the story, and GOP lawmakers haven’t been eager to give it up — even though there were plenty of items in the audit that gave the party the opportunity to say “I told you so.”

“What are the facts about CCAP fraud?” asked Legislative Auditor Jim Nobles. “It is a known problem. It has been known as a problem for a number of years, both nationally and in Minnesota.” In fact, Minnesota created a special investigative unit in 2013 because of concerns over abuse of tax dollars.

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Among other things, the audit found that CCAP lacks good record-keeping by providers and that the state sometimes lacked the willingness to get tough on the largest centers, which largely serve immigrant populations and where many of the red flags had been raised. Nobles also found dysfunction in the relationship between the fraud investigation unit of the Department of Human Services, which oversaw CCAP, and department’s inspector general, Carolyn Ham. (Update: the department released this statement today: “Effective today, March 18, Carolyn Ham will be out of the office.” A request to clarify whether she has been dismissed, been transferred or is simply out of the office produced this: “Carolyn Ham is an employee of the Minnesota Department of Human Services; she is currently out of the office. Data privacy laws limit what we can say beyond this information.”)

In response, Republicans in the GOP-controlled state Senate passed legislation through committee by the end of the week to restrict family members from receiving public assistance for hours they work in a child care, one of the indicators of fraud found in an independent investigation ordered by DHS released earlier this year. Also moved forward was legislation to require larger child care centers to have surety bonds that could be tapped to recover money fraudulently billed, while a third bill would require better record keeping and logging of daily attendance, another flaw identified in the audit and the independent investigation.

Republicans also demanded the resignation of Ham and a reorganization that would make the DHS’ inspector general independent of agency leaders, something Nobles recommended.

Dems focus on ‘reprehensible’ attacks

The Walz administration said it too is taking fraud seriously. “This fraud and misuses take away from Minnesotans and the majority of the families that are eligible for this program,” Department of Human Services Commissioner Tony Lourey told the Legislative Audit Committee.

Added DHS deputy commissioner Chuck Johnson: “We have a lot of work to do in the department. We need to build better internal controls in this program, we need to build a better system of determining fraud earlier in the process so we can prosecute it effectively.”

The HHS response also includes cultural competency training for staff and an advisory committee that includes providers and parents.

Republicans demanded the resignation of DHS inspector general Carolyn Ham.
Senate Media Services
Republicans demanded the resignation of DHS inspector general Carolyn Ham.
DFL lawmakers also said they are taking fraud seriously. But the response among leadership was somewhat muted last week. “We have to make sure assistance is going to those who truly need it,” said House Speaker Melissa Hortman in a press release. “We will be working with the Walz administration and advocates to ensure the integrity of this program.”

No House bills addressing the CCAP audit met a first deadline for bills to clear House committees. The issue remains alive, however, because there are CCAP bills alive in the Senate that have House versions, and the House Early Childhood committee will hear proposals Thursday to respond to concerns raised about the program.

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Yet DFLers and some key constituency groups have their own affinity for the bags-full-of-cash allegation, if only to use it to remind voters of what they call a willingness — if not an eagerness — for some GOP politicians to fan the flames of anti-immigration and anti-Islamic sentiments.

“Any misuse of public funds is serious and must be addressed, but using unsubstantiated allegations as an excuse for Islamophobic attacks on an entire community is reprehensible,” said House Majority Leader Ryan Winkler, DFL-Golden Valley. “We will continue to support the families that rely on this vital program, and improve the affordability and accessibility of child care.”

At a press conference the day of the audit’s release, Muslim leaders said the report disproves the allegations of terrorism connections but that harm was done by both the TV report — and the use of it in GOP campaigns leading up to the 2018 election. “Their actions stoked hatred and fear against the Somali-Muslim community throughout the last 10 months,” said Asad Zaman, the executive director of Muslim American Society of Minnesota. “Islamophobia is real and it puts our community in real danger.

“The Republican response today should have started with an apology,” Zaman said. He added that fraud in the system should be addressed, but said it consumed “a small percentage of CCAP funds.”

That question — how much money has the state lost to fraud in the program— was also left unanswered by the audit. DFLers stick closer to Nobles’ assessment: that a $100 million loss claimed by a whistleblower, Scott Stillman, was unprovable and likely too high. Republicans continue to use the $100 million figure, however, because the current lead investigator for the program used it with the explanation that all dollars spent in daycare centers with questionable billing and dubious care standards are suspicious.

Scott Stillman
Senate Media Services
DFLers stick to the auditor's assessment: that a $100 million loss claimed by a whistleblower, Scott Stillman, was unprovable and likely too high.
The debate over the audit — as well as dueling estimates of fraud totals — also isn’t going away. It will play a role in the upcoming budget negotiations. Walz has asked for a $44 million increase in funding for CCAP to resolve the program’s waiting list and to raise the rates paid to the child care providers. Republicans are saying that rooting out fraudulent actors will provide the resources needed under current funding levels.

An investigation and analysis commissioned by the department includes one conclusion about the dynamics between state employees within the CCAP program that could also describe those between GOP and DFL legislators over the issue. “There is always some tension between program staff – who have a justified (and justifiable) interest in making benefits available to those who are eligible for them – and program enforcement staff – who believe that it is equally important to safeguard taxpayer dollars from improper use,” the analysis found. “However, there should be some common ground where both parties agree that fraud damages the program – not only from the taxpayer perspective but from the fact that it denies resources for people who are truly eligible and legitimately need child care assistance.”