Jan 14, 2026
A nonpartisan performance audit is raising questions about how Minnesota’s Behavioral Health Administration oversees nearly $200 million in public funding for mental health and addiction services.
According to the report, the Minnesota Department of Human Services distributed more than $425 million in behavioral health grants to 830 grantees between July 1, 2022, and December 31, 2024 (1). Members from the Office of the Legislative Auditor (OLA) found that more than half of the required progress reports for a sample of grant agreements were missing or overdue. The agency also could not show that it completed 27 of 67 required monitoring visits. In another 24 visits involving 11 grantees, officials were unable to provide any supporting documentation (2).
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The audit also found that agency officials repeatedly approved large grants without competitive bidding, adequate records or clear explanations for why certain organizations were chosen over other applicants. When auditors pressed for answers, managers allegedly attempted to retroactively justify those decisions by creating or backdating documents.
"What we saw is there were multiple entities that could have been eligible, and they chose not to justify why they were picking those," said Lori Lyson, a deputy legislative auditor with the OLA (3).
Who gave the stamp of approval?
Among the audit’s most troubling findings was a single grant that paid out $672,000 for roughly one month of work, with no documentation showing what services were actually provided.
According to the report, the grant was approved by a Department of Human Services manager who left the department just days later and then resurfaced as a paid consultant for the same organization that received the funds.
"Frankly, in the 27-plus years I've been with the OLA, I've never seen this before,” Legislative Auditor Judy Randall said. “I will say we've had suspicions periodically, but we've never been able to prove it, to document it, and we did in this case. And it's very troubling."
The audit comes as Minnesota faces heightened scrutiny over fraud and oversight failures across multiple state programs. Since 2021, federal investigations have led to charges against more than 90 people, with prosecutors estimating total losses could reach $9 billion (4).
Much of that stems from a COVID-era scheme involving the nonprofit Feeding Our Future, which submitted fraudulent meal reimbursement claims paid with federal funds by the Minnesota Department of Education (5). Investigators say the claims relied on fake invoices and attendance rosters, pushing losses tied to the case to nearly $250 million.
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As pressure has grown, Gov. Tim Walz announced this week that he will not seek a third term. Federal authorities also have stepped up enforcement, including deploying additional Homeland Security investigators to review alleged fraud tied to child care and other public programs.
The audit’s findings reflect a broader national issue. In fiscal year 2023, federal agencies reported an estimated $236 billion in improper payments, including funds that should not have been issued, were paid in the wrong amount or lacked sufficient supporting documentation.
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A roadmap for reform
The Department of Human Services says it is taking the audit’s findings seriously and has already begun work to tighten oversight. Interim Commissioner Shireen Gandhi acknowledged that the report highlighted gaps in how behavioral health grants were monitored.
“The OLA's report highlights the importance of the grant compliance work already underway at the department. And the findings provide us with a road map for our focus going forward to continue strengthening oversight and integrity of behavioral health grants," Gandhi said. "I take the report seriously, I accept responsibility for the findings, and I will ensure the (Department of Human Services) closes the findings."
The response comes as the White House ramps up efforts to rein in how federal grant money is awarded and tracked. In an executive order issued in August, the administration warned that weak documentation, noncompetitive awards and vague performance benchmarks can leave taxpayer dollars vulnerable to misuse (6). The order calls on agencies to increase senior-level oversight, streamline grant processes, cut high administrative costs and revoke funding when programs fail to show progress or align with agency priorities.
Auditors described the issues uncovered at the Minnesota Department of Human Services as systemic, prompting questions from lawmakers about whether the findings could lead to further investigations and whether anyone will ultimately be held accountable.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Office of the Legislative Auditor, State of Minnesota (1); CBS News (2, 5); KARE 11 (3); Minnesota Reformer (4); White House (6
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Victoria Vesovski is a Toronto-based staff reporter at Moneywise covering personal finance, lifestyle and trending news. She holds degrees from the University of Toronto and New York University, and her work has appeared on platforms including Yahoo Finance, MSN Money and Apple News.
