Legislative auditor recommendations regarding agency grant, inventory, and debt collection practices implementation and lottery provisions modifications

A bill for an act

relating to state government; implementing recommendations of the legislative

auditor regarding agency grant, inventory, and debt collection practices; making

lottery retailers responsible for lost, stolen, or missing lottery tickets; requiring

the lottery director to amend rules; amending Minnesota Statutes 2024, sections

3.978, subdivision 3; 16B.24, by adding a subdivision; 16B.97, subdivisions 3, 4;

16B.98, subdivisions 3, 6, by adding subdivisions; 16D.03, by adding a subdivision;

349A.06, by adding a subdivision; Minnesota Statutes 2025 Supplement, sections

16A.057, subdivision 5; 16B.98, subdivision 6a; 16D.09, subdivision 1; proposing

coding for new law in Minnesota Statutes, chapter 16A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 3.978, subdivision 3, is amended to read:

Subd. 3.

Penalties.

(a) If a person refuses or neglects to obey any lawful direction of

the legislative auditor, a deputy or assistant, or withholds any information, book, record,

paper or other document called for by the legislative auditor for the purpose of examination,

after having been lawfully required by order or subpoena, upon application by the auditor,

a judge of the district court in the county where the order or subpoena was made returnable

shall compel obedience or punish disobedience as for contempt, as in the case of a similar

order or subpoena issued by the court.

(b) A person who swears falsely concerning any matter stated under oath is guilty of a

gross misdemeanor.

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(c) Materials and information provided to the legislative auditor by public officials or

public employees are documents subject to section 609.43.

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Sec. 2.

Minnesota Statutes 2025 Supplement, section 16A.057, subdivision 5, is amended

to read:

Subd. 5.

Monitoring Office of the Legislative Auditor audits.

(a) The commissioner

must review audit reports from the Office of the Legislative Auditor and take appropriate

steps to address internal control problems found in executive agencies.

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(b) The commissioner must regularly provide guidance to all executive agencies on how

to implement Office of the Legislative Auditor recommendations related to internal controls.

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(b)
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(c)
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The commissioner must submit a report to the legislative auditor no later than

September 1 of each year detailing the implementation status of all recommendations

identified in an auditor's financial audit, program evaluation, or special review during the

prior five years. The report must include a specific itemization of recommendations that

have not been implemented during that period, along with the basis for that decision.

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(d) The commissioner must provide technical assistance, as resources allow, to agencies

that have not implemented recommendations from the Office of the Legislative Auditor

related to internal controls, as detailed in the annual report in section 3.971, subdivision 10,

paragraph (a).

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Sec. 3.

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[16A.38] PAYMENT OVERSIGHT.

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(a) Unless otherwise specified, an appropriation, allocation, payment, or transfer of

money made through a state agency or board to a nongovernmental entity is subject to

oversight by the state agency or board, in a manner consistent with sections 16B.97 to

16B.991 or 16C.001 to 16C.36, as applicable.

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(b) This section does not apply to general obligation grants as defined in section 16A.695,

capital project grants to political subdivisions as defined in section 16A.86, or capital project

grants otherwise subject to section 16A.642. These grants are subject to the policies and

procedures adopted by the commissioner of management and budget and other requirements

specified in applicable law.

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(c) This section does not apply to payments made by the commissioner of revenue under

chapter 290C.

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Sec. 4.

Minnesota Statutes 2024, section 16B.24, is amended by adding a subdivision to

read:

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Subd. 4a.

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Inventory training.

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All state agency employees responsible for maintaining

an inventory of state real property or state personal property must annually complete training

provided by the commissioner. The training must include but is not limited to accountability

and oversight requirements for different types of assets and property, how to ensure adequate

segregation of duties, and identification of inventory-related risks.

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Sec. 5.

Minnesota Statutes 2024, section 16B.97, subdivision 3, is amended to read:

Subd. 3.

Discretionary powers.

The commissioner has the authority to:

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(1) review grants management practices and establish and enforce policy and procedure

improvements;

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(2)
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(1)
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sponsor, support, and facilitate innovative and collaborative grants management

projects with public and private organizations;

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(3)
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(2)
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review, recommend, and implement alternative strategies for grants management;

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(4)
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(3)
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collect and disseminate information, issue reports relating to grants management,

and sponsor and conduct conferences and studies;

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(5)
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(4)
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participate in conferences and other appropriate activities related to grants

management issues;

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(6)
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(5)
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suspend or debar grantees from eligibility to receive state-issued grants for up to

three years for reasons specified in Minnesota Rules, part
1230.1150
, subpart 2. A grantee

may obtain an administrative hearing pursuant to sections
14.57
to
14.62
before a suspension

or debarment is effective by filing a written request for hearing within 20 days of notification

of suspension or debarment;
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and
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(7) establish offices for the purpose of carrying out grants governance, oversight, and

management; and

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(8)
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(6)
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require granting agencies to submit grant solicitation documents for review prior

to issuance at dollar levels determined by the commissioner.

Sec. 6.

Minnesota Statutes 2024, section 16B.97, subdivision 4, is amended to read:

Subd. 4.

Duties.

(a) The commissioner shall:

(1) create general grants management policies and procedures that are applicable to all

executive agencies. The commissioner may approve exceptions to these policies and

procedures for particular grant programs. Exceptions shall expire or be renewed after five

years. Executive agencies shall retain management of individual grants programs;

(2) provide a central point of contact concerning statewide grants management policies

and procedures;

(3) serve as a resource to executive agencies in such areas as training, evaluation,

collaboration, and best practices in grants management;

(4) ensure grants management needs are considered in the development, upgrade, and

use of statewide administrative systems and leverage existing technology wherever possible;

(5) oversee and approve future professional and technical service contracts and other

information technology spending related to executive agency grants management systems

and activities;

(6) provide a central point of contact for comments about executive agencies violating

statewide grants governance policies and about fraud and waste in grants processes;

(7) forward received comments to the appropriate agency for further action, and may

follow up as necessary;

(8) provide a single listing of all available executive agency competitive grant

opportunities and resulting grant recipients;

(9) selectively review development and implementation of executive agency grants,

policies, and practices;
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and
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(10) selectively review executive agency compliance with best practices
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.
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;
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(11) ensure that all executive agencies comply with the training requirements under

section 16B.98, subdivision 6a;

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(12) review executive agency grants management practices and establish and enforce

policy or procedure improvements as needed, with a focus on grantees that a commissioner

has determined, based on objective criteria, pose a substantial risk of not performing duties

required under the grant agreement; and

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(13) establish offices for the purpose of carrying out grants governance, oversight, and

management.

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(b) The commissioner may determine that it is cost-effective for agencies to develop

and use shared grants management technology systems. This system would be governed

under section
16E.01, subdivision 3
, paragraph (b).

Sec. 7.

Minnesota Statutes 2024, section 16B.98, subdivision 3, is amended to read:

Subd. 3.

Conflict of interest.

(a) The commissioner must develop policies regarding

code of ethics and conflict of interest designed to prevent conflicts of interest for employees,

committee members, or others involved in the recommendation, awarding, and administration

of grants. The policies must apply to employees who are directly or indirectly in the grants

process,
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which may include the following
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including
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:

(1) developing request for proposals or evaluation criteria;

(2) drafting, recommending, awarding, amending, revising, or entering into grant

agreements;

(3) evaluating or monitoring performance;
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or
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and
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(4) authorizing payments.

(b) The policies must include:

(1) a process to make all parties to the grant aware of policies and laws relating to conflict

of interest, and training on how to avoid and address potential conflicts; and

(2) a process under which those who have a conflict of interest or a potential conflict of

interest must disclose the matter.

(c) If the employee, appointing authority, or commissioner determines that a conflict of

interest exists, the matter shall be assigned to another employee who does not have a conflict

of interest. If it is not possible to assign the matter to an employee who does not have a

conflict of interest, interested personnel shall be notified of the conflict and the employee

may proceed with the assignment.

Sec. 8.

Minnesota Statutes 2024, section 16B.98, is amended by adding a subdivision to

read:

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Subd. 4a.

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Reporting of investigations.

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The head of a granting agency must report to

the commissioner any grantee being investigated due to a credible allegation of fraud. The

commissioner must maintain a list of grantees reported under this subdivision. The

commissioner must not remove a grantee from the list until an investigation is complete or

closed.

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Sec. 9.

Minnesota Statutes 2024, section 16B.98, subdivision 6, is amended to read:

Subd. 6.

Grant administration
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; site visit requirement
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.

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(a)
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A granting agency shall

diligently administer and monitor any grant it has entered into. A granting agency must

report to the commissioner at any time at the commissioner's request on the status of any

grant to which the agency is a party.

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(b) A granting agency must conduct an unannounced, on-site, and in-person site visit

for any grant over $50,000 and annual unannounced, on-site, and in-person site visits for

any grant over $250,000. The commissioner may approve exceptions to this requirement if

the granting agency sufficiently justifies why unannounced, on-site, and in-person site visits

are not suitable for a specific grant program.

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EFFECTIVE DATE.

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This section is effective January 15, 2027.

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Sec. 10.

Minnesota Statutes 2025 Supplement, section 16B.98, subdivision 6a, is amended

to read:

Subd. 6a.

Grants management training.

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(a)
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All state agency staff assigned grant

management responsibilities must complete initial grants management training before

assuming grants management job duties and must complete continuing grants management

training on an annual basis.

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(b) All state agency staff assigned to conduct financial reconciliation of grants must

complete initial training on conducting financial reconciliations before assuming grant

management responsibilities and must complete continuing financial reconciliation training

on an annual basis.

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(c) All state agencies must report annually to the commissioner the number of staff

members who have received grants management training and training on conducting final

reconciliation of grants.

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(d) The commissioner must ensure that all state agencies comply with the training

requirements in this section.

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EFFECTIVE DATE.

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This section is effective January 15, 2027.

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Sec. 11.

Minnesota Statutes 2024, section 16B.98, is amended by adding a subdivision to

read:

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Subd. 15.

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Hiring limitation.

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For a period of 12 months after a granting agency awards

a grant, the grantee must not hire an individual to work with that grant who was a state

employee involved in awarding or managing the grant. If a grantee violates this subdivision,

the granting agency must immediately terminate the grant, the grantee must repay to the

state all money received under the grant, and the commissioner must debar the grantee for

a period of 24 months beginning on the first day of the individual's employment with the

grantee.

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Sec. 12.

Minnesota Statutes 2024, section 16D.03, is amended by adding a subdivision to

read:

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Subd. 4.

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Training.

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A state agency employee who oversees balances owed to the state

must complete training developed by the commissioners of Minnesota Management and

Budget and the Department of Revenue to quantify such balances and determine options

for collection. As part of this training, the commissioners must establish guidance for state

agency staff to follow when collecting balances owed to the state.

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EFFECTIVE DATE.

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This section is effective January 15, 2027.

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Sec. 13.

Minnesota Statutes 2025 Supplement, section 16D.09, subdivision 1, is amended

to read:

Subdivision 1.

Generally.

(a) When a debt is determined by a state agency to be

uncollectible, the debt may be written off by the state agency from the state agency's financial

accounting records and no longer recognized as an account receivable for financial reporting

purposes. A debt is considered to be uncollectible when (1) all reasonable collection efforts

have been exhausted, (2) the cost of further collection action will exceed the amount

recoverable, (3) the debt is legally without merit or cannot be substantiated by evidence,

(4) the debtor cannot be located, (5) the available assets or income, current or anticipated,

that may be available for payment of the debt are insufficient, (6) the debt has been

discharged in bankruptcy, (7) the applicable statute of limitations for collection of the debt

has expired, or (8) it is not in the public interest to pursue collection of the debt.

(b) Uncollectible debt
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and the collection efforts taken
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must be reported by the state

agency as part of its quarterly reports to the commissioner of management and budget.
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If

no collection efforts were made for a particular debt, the state agency must report its rationale.
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The basis for the determination of the uncollectibility of the debt must be maintained by

the state agency.

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(c)
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If an uncollectible debt equals or exceeds $100,000, the agency shall notify the chairs

and ranking minority members of the legislative committees with jurisdiction over the state

agency's budget at the time the debt is determined to be uncollectible. The information

reported shall contain the entity associated with the uncollected debt, the amount of the

debt, the revenue type,
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the collection efforts made or the reason no collection efforts were

made,
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the reason the debt is considered uncollectible, and the duration the debt has been

outstanding.

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(d)
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The commissioner of management and budget shall report to the chairs and ranking

minority members of
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the
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all
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legislative committees
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with jurisdiction over Minnesota

Management and Budget
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an annual summary
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, by agency,
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of the number and dollar amount

of debts determined to be uncollectible during the previous fiscal year by November 30 of

each year. Determining that the debt is uncollectible does not cancel the legal obligation of

the debtor to pay the debt.

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EFFECTIVE DATE.

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This section is effective July 1, 2027.

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Sec. 14.

Minnesota Statutes 2024, section 349A.06, is amended by adding a subdivision

to read:

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Subd. 13.

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Lottery retailers responsible for tickets.

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(a) Tickets accepted by the retailer

from the lottery or its authorized representatives are considered to have been purchased by

the retailer, unless returned within the time specified. The retailer is financially responsible

for lost, stolen, or missing tickets.

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(b) Tickets that have not been deactivated and are not returned by the retailer on the

final settlement date, regardless of reason, shall be deemed to have been sold to the retailer.

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(c) The director of the lottery may waive the lottery retailer's financial responsibility for

lost, stolen, or missing tickets if granting a waiver is consistent with the secure, fair, and

efficient operation of the lottery.

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(d) Notwithstanding paragraph (c), the director of the lottery may not waive a lottery

retailer's financial responsibility for packs or portions of packs of lost, stolen, or missing

tickets if any ticket in those packs or portions of packs has been cashed.

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Sec. 15.
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LOTTERY RULES.
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The director of the lottery must amend rules to comply with amendments to Minnesota

Statutes, section 349A.06, in this act and may do so using the good cause exemption under

Minnesota Statutes, section 14.388.

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