Grantee fraud risk rating system policy gets strong committee support

State agencies that award and manage grants are required to follow policies put forth by the Office of Grants Management.

Another step is being sought to mitigate risks and root out fraudulent activity.

Sponsored by Rep. Jim Nash (R-Waconia), HF3682, as amended, would charge the Department of Administration with developing a grantee fraud rating system policy informed by the principles of vendor risk management. It would work in concert with current pre-grant evaluation and assessment work.

Approved without objection Tuesday by the House State Government Finance and Policy Committee, the bill is headed to the House Ways and Means Committee.

“The concept of vendor risk management is effectively the parent organization would set a list of criteria that have to be met in order for something to proceed,” Nash said. “In the cybersecurity world, it’s how secure are you, what internal practices do you have. For this application, it would be details about what is the recipient organization going to do with the money, what is their internal controls, what are your internal structures and things like that.”

A merit-based score would be created, and the granting organization could offer suggestions for a requestor to elevate their score.

“This is a bill to look at preventing fraud in the future by applying some controls up front,” Nash said. “… It gives us the ability to say, ‘You know what, out of a potential 200 you scored 30 and we would like to have you begin some remediation to boost up your scores, to boost up your internal controls, compliance issues and really get to the next level.’ (This is a way) where we can say to the taxpayer in Minnesota, to the administration, that we have done our level best to make it so we can confidently say we are doing our absolute best to ferret out any potential fraud.”