In a new report filed early Tuesday by Minnesota’s Office of the Legislative Auditor (OLA), a recommendation has been made to recover payments made to ineligible persons – as well as those who used someone else’s identity – through the Frontline Worker Pay Program.

According to the audit, the Minnesota Department of Labor and Industry (DLI) and the Department of Revenue (DOR) both made mistakes during the program, which was signed into law in the spring of 2022 after passing through the Senate by a vote of 65-1 and 124-5 in the House.

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The OLA says members of the DLI didn’t comply with program requirements, and the DOR didn’t verify the adjusted gross income for all applicants. In addition, the Minnesota Information Technology Services, which partnered with the DLI, didn’t comply with the state’s Official Records Act.

According to the OLA, both the DOR and the DLI approved payments to people who weren’t eligible and to people whose eligibility couldn’t be determined. The report states that auditors also found the DLI approved payments to people whose applications had indications of fraud without investigating whether applicants were legitimate.

The report goes on to say that the DOR didn’t verify the adjusted gross income for all applicants.

As previously reported by 5 EYEWITNESS NEWS, in order to be eligible for the bonuses, applicants couldn’t exceed the income cap, not receive any unemployment insurance benefits for more than 20 weeks during the peacetime emergency, worked close to others and had to have worked at least 120 non-remote hours between March 15, 2020, through June 30, 2021. In addition, workers also had to be employed in one of a wide variety of sectors, including health care, food service, public transit, manufacturing and more.

Applicants also had a window of June 8 through July 22, 2022, to apply for the funds, which were distributed in October. While lawmakers approved $500 million for the checks and estimated roughly 667,000 state residents to be eligible for roughly $750, more than a million people were approved to receive funds, and each person received $487.45 either by direct deposit or by prepaid debit card.

While nearly 1.2 million people applied for the bonuses, 214,000 of those were rejected. Those rejections were based on criteria such as being paid too much unemployment, their employment couldn’t be verified, earning too much money, identity couldn’t be verified and the submission of duplicate applications.

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In addition, the auditor’s office says the DLI and the Minnesota Information Technology Services didn’t make sure that both the contractor and the subcontractor kept data about frontline worker pay as specified in their contracts.

While those agencies and the DOR were found to have a fault, the OLA says the Department of Employment and Economic Development (DEED) complied with program requirements.

As part of its recommendations, the OLA says the state legislature should “consider the amount of risk the state is willing to accept when establishing programs quickly and with eligibility conditions that rely on self-attestation.”

In addition to the recovery of payments made to ineligible applications, the OLA also made the following recommendations:

• The DLI and DOR should determine whether applicants whose eligibility couldn’t be determined were actually eligible for a payment.
• The DLI should review all applications with fraud indicators to determine if payments were made to ineligible persons.
• The DOR should use additional methods to verify adjusted gross income for anyone who applied and didn’t have a tax return on file in the state for the 2020 and 2021 tax years.
• The DLI and the Minnesota Information Technology Services should make sure data retention requirements are included in all contracts.
• The DLI and Minnesota Information Technology Services should ensure the state keeps data necessary for making program decisions and require the same data be destroyed by third parties once contract obligations are finished.
• The DLI should include the retention of data collected by its contractors and subcontractors in records retention schedules for its programs.

Tuesday’s audit goes on to say that as of April, 8,182 of the prepaid debit cards issued by the state hadn’t been activated by recipients. Those cards contain more than $3.9 million of the $500 million approved by lawmakers.

It should also be noted that during the months between applications for the funds opening and their distribution, the former commissioners for both the Department of Revenue and the Department of Labor and Industry left their roles.

As reported by 5 EYEWITNESS NEWS on Aug. 1 of that year, Gov. Tim Walz announced Roslyn Robertson would be retiring on Aug. 12 after spending more than 34 years in a variety of roles at the DLI.

Almost two weeks later, the departure of former DOR commissioner Robert Doty was announced by Walz, who said Doty would leave his role on Sept. 2 and become the chief financial officer at the Science Museum of Minnesota.

Minnesota Republicans slammed Democrats following the release of the report, with House Minority Leader Lisa Demuth (R-Cold Spring) saying it proves “that the Walz Administration and legislative Democrats just don’t care about stopping fraud.”

“At the end of the day, fraudsters once again took advantage of a state-run COVID program to enrich themselves. The real victims here are the people required to work in close proximity with others during a pandemic and got a smaller check than expected,” Sen. Karin Housley (R- Stillwater) added. “They are the ones who were blatantly defrauded.”

Paul Marquart, the current Commissioner for the Department of Revenue, issued a letter to the OLA, saying the legislation “directed the Department of Revenue to verify ‘to the extent possible’ adjusted gross income (AGI) of Frontline Worker Pay program applicants” and that the words “reflect the legislature’s intent to send Frontline Worker payments as soon as practicable.”

Marquart went on to write that the department “followed the law” and that they “verified adjusted gross income to the extent possible for 97.3% of all payment recipients.” For the rest, the department used “an alternative mechanism that relied on the applicant’s attestation, along with confirmation that the applicant received income from employment in Minnesota.”

He added that a tax return is the only way they can verify AGI, but the legislation didn’t require applicants to have a state tax return available.

DLI Commissioner Nicole Blissenbach also wrote to the OLA, saying the office’s findings “take issue with the program itself, rather than the way the state implemented the program.”

In addition, Blissenbach wrote the legislature didn’t give the DLI “any additional data sharing authority” and that the department “did not have access to Department of Revenue or Department of Health records to verify applications.” She went on to say that the fraud the agencies found and prevented was extensive, and the OLA audit found a fraction of a percent of recipients to potentially be ineligible, and that the “DLI and partner agencies ran an incredibly successful program and achieved the goals set out for us by the Legislature by quickly and efficiently building and executing the FWP program.”

The full audit can be found by CLICKING HERE. You can watch the full presentation in the video player below.