Strengthening prevention by withholding payments to suspected fraudsters

The ability of state agencies to stop payment to program participants suspected of fraud will be strengthened.

A 2025 law allows state agencies to withhold payments to a program participant for up to 60 days if there is a preponderance of evidence the participant has committed fraud to obtain payments. The provision is set to expire July 1, 2027.

Taking effect Aug. 1, 2026, a new law removes the 60-day cap and expiration date, and will lower the evidentiary standard to a credible allegation of fraud that is verified by the agency. An agency’s decision can no longer be appealed to the state court of administrative hearings, rather the participant can request administrative reconsideration by the agency.

Agencies will be permitted to notify each other and can withhold payment if a potential fraudster collects payments from more than one agency and if doing so will not compromise an active investigation. And the definition of “program participant” will expand to include individuals and legal entities.

Further, the Department of Human Services (beginning Nov. 30, 2026) and the Department of Children, Youth, and Families (beginning Jan. 1, 2027) will be required to annually provide a report to the Legislature on program integrity functions within the department.

To improve state grantmaking, the law will also make statutory changes by:

• adding to the definition of a grant recipient to clarify grants will be terminated for both individuals and any related parties if convicted of fraud;

• refining Department of Administration authority to approve agency-requested exceptions to policy requirements on a more granular level;

• removing Department of Administration authority to share the name of a whistleblower with the agency; and

• making technical changes to cross references.

Rep. Kristin Bahner (DFL-Maple Grove) and Sen. Amanda Hemmingsen-Jaeger (DFL-Woodbury) are the sponsors.

HF3629*/SF4149/CH122

HF3629* / SF4149 / CH122