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A new state audit investigating the massive fraud scandal in Gov. Tim Walz's Minnesota revealed that the state's Department of Human Services (DHS) failed for years to properly investigate Medicaid kickback allegations while incorrectly claiming that they did not have the authority to do so.
The Office of the Legislative Auditor report released on Tuesday, titled "Department of Human Services Investigations of Alleged Kickbacks in the Early Intensive Developmental and Behavioral Intervention Program," found that DHS's Office of Inspector General (OIG) has long possessed the legal authority to pursue kickback cases independently, contradicting the agency's own claims.
Instead, DHS officials operated under the belief that they could only investigate kickbacks if they were tied to other forms of fraud, such as billing abuse or theft, prompting a rebuke in the report.
"We disagree with DHS's assertion that it did not have the authority to investigate allegations of kickbacks alone," the report states. "Based on our analysis, DHS has had the authority to investigate allegations of kickbacks in MA since the late 1990s."
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The audit found DHS declined to investigate three specific kickback allegations from 2021 to 2023 after concluding it lacked authority.
"In the three cases that we identified in this review, they did not refer any of the three cases to law enforcement or any other investigation agency," Deputy Legislative Auditor Katherine Theisen said, according to KARE 11 News. She added that DHS also declined to flag the cases for further review.
The report also identified a decades-old error in DHS administrative rules that may have limited the agency's ability to suspend payments during kickback investigations.
The Early Intensive Developmental and Behavioral Intervention (EIDBI) program, which provides autism services, has faced scrutiny over fraud risks as the program's budget jumped from $3 million in 2018 to nearly $400 million in 2023.
Kickbacks were a key component of fraud schemes uncovered in the state's autism services program, with prosecutors describing how providers used financial incentives to attract and retain families in order to maximize Medicaid billing, CBS News reported in December.
In one case, investigators said an autism center operator fraudulently billed millions while using tactics that included offering payments or benefits tied to enrollment, illustrating how kickbacks helped drive inflated claims and contributed to large-scale misuse of public funds intended for children with autism.
The audit recommended that DHS "should amend its administrative rule defining 'fraud' to clearly include kickbacks" and said the legislature should intervene if that doesn't take place.
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The department responded in a letter included in the report, saying, "We agree with the recommendation that fraud should be defined to more clearly include kickbacks."
In a press release, Minnesota House Fraud Prevention Committee Chair Kristin Robbins, a Republican state representative running for governor, wrote, "The continued lack of accountability for the rampant fraud in this state is astounding."
"DHS has been complicit in fraud because they have repeatedly failed to investigate credible allegations of fraud in multiple programs over many years. This OLA report provides the latest proof of their failure to provide proper oversight in the EIDBI (autism) program."
Robbins added that "if DHS had corrected an error in its administrative rules, two other decades-old state law provisions would also have permitted DHS to suspend payments during an investigation for kickbacks."
Fox News Digital reached out to Walz's office for comment.
The report's findings quickly sparked outrage from conservatives on social media.
"The feds need to step in immediately," Townhall columnist Dustin Grage posted on X.
"Despite claiming they had no authority, a new OLA report confirms DHS could investigate fraud in autism services," Minnesota House Republicans posted on X. "The Walz administration didn't act for years. How much did it cost Minnesotans?"
"Contrary to Walz administration claims, they have always had the legal authority to address kickback schemes," Minnesota Republican state Rep. Walter Hudson posted on X. "They simply choose not to."
