House unanimously passes bill expanding state powers to withhold payments over suspected fraud

The ability of state agencies to stop payment to program participants suspected of fraud may 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.

Repassed unanimously by the House Sunday after it was amended and passed unanimously by the Senate, HF3629, now awaiting gubernatorial action, would remove the 60-day cap and the expiration date, and it would lower the evidentiary standard to a credible allegation of fraud that is verified by the agency. An agency’s decision could no longer be appealed to the state court of administrative hearings, rather the participant could request administrative reconsideration by the agency.

Agencies would be permitted to notify each other and can withhold payment if a potential fraudster collects payments from more than one agency if doing so would not compromise an active investigation. And the definition of “program participant” would 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) would be required to annually provide a report to the Legislature on program integrity functions within the department.

“This is a commonsense, good government bill to improve process and protections while adding critical tools in the toolbox to prevent the misuse of state funds and prevent fraud,” said Rep. Kristin Bahner (DFL-Maple Grove), the bill sponsor.

It would also make changes to statutes that aim to improve state grantmaking:

• 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.