Payment denial to program participants under certain circumstances

A bill for an act

relating to state government; withholding payments to program participants under

certain circumstances; amending Minnesota Statutes 2025 Supplement, section

15.013.

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

Section 1.

Minnesota Statutes 2025 Supplement, section 15.013, is amended to read:

15.013 PROGRAM PAYMENTS WITHHELD; FRAUD.

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Subdivision 1.

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Definitions.

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(a) For purposes of this section, the following terms have

the meanings given.

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(b) "Entity" means any corporation, partnership, proprietorship, firm, enterprise, franchise,

association, organization, or any other legal entity that engages in either nonprofit or

profit-making activities.

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(c) "Evidence" means credible evidence obtained from an internal agency investigation,

audits, court records, law enforcement investigations, or investigations by other state or

federal agencies.

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(d) "Fraud" means an intentional or deliberate act to deprive another of property or

money or to acquire property or money by deception. Fraud includes knowingly submitting

false information to a federal, state, or local government entity for the purpose of obtaining

a greater compensation or benefit than the person is legally entitled. Fraud also includes

acts that constitute a crime against any program, or the attempts or plans to commit those

crimes, including but not limited to theft in violation of section
609.52
, perjury in violation

of section
609.48
, and aggravated forgery and forgery in violation of sections
609.625
and

609.63
, and substantially similar federal laws.

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(e) "Individual" means a natural person.

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(f) "Program" means any program funded by a state or federal agency that involves the

transfer or disbursement of public funds or other public resources.

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(g) "Program participant" means an entity, or an individual on behalf of an entity, that

receives, disburses, or has custody of funds or other resources transferred or disbursed under

a program.

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(h) "Agency" has the meaning given in section
16B.01, subdivision 2
, and includes the

Minnesota State Colleges and Universities.

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Subd. 2.

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Administrative withholding of payments.

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(a) The head of an agency may

withhold payments to a program participant in a program administered by that agency for

a period not to exceed 60 days if the agency head determines that a preponderance of the

evidence shows that the program participant has committed fraud to obtain payments under

the program.

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(b) Notwithstanding subdivision 3, the agency head must notify the program participant

of the decision to withhold payments at least 24 hours before withholding a payment. The

notice must:

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(1) state that payments will be withheld in accordance with this section;

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(2) state the date the administrative withholding of payments is effective;

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(3) state the reasons for withholding payments, excluding specific information that may

jeopardize an active investigation;

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(4) state the date the administrative withholding period terminates;

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(5) inform the program participant of the right to submit written evidence for

consideration by the agency head; and

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(6) inform the program participant of their rights under chapter 14 to appeal the decision

to withhold payment.

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(c) Following notice and to the extent practicable, the agency must ensure that any person

whose public funds are interrupted and who is not implicated in the suspected fraud receives

notice of their rights related to continued receipt of the public funds, services, or programs

for which they are eligible. The agency head must provide a point of contact for the impacted

persons.

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(d) A program participant may appeal an agency head's decision under this subdivision

by initiating a contested case proceeding under chapter 14 or by petitioning the court for

relief, including injunctive relief.

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(e) This subdivision does not apply if an agency is precluded from withholding payments

to a program participant by federal law or obligations under a contract.

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Subd. 3.

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Data classification and access.

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(a) During the administrative payment

withholding period under subdivision 2, data relating to evidence of fraud are classified as:

(1) confidential data on individuals pursuant to section
13.02, subdivision 3
; or (2) protected

nonpublic data pursuant to section
13.02, subdivision 13
, in the case of data not on

individuals.

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(b) All data relating to evidence of fraud become public at the termination of the

withholding period unless classified as not public data under state or federal law. The identity

of a complainant is private data on individuals, as defined in section
13.02, subdivision 12
.

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(c) An agency may disclose data classified as confidential or protected nonpublic under

this section to a federal, state, or local government agency or a law enforcement agency if

the agency determines that access will help prevent fraud against public programs or aid

the law enforcement process.

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Subd. 4.

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Court order.

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The head of an agency may petition the court for a temporary

order pursuant to Rule 65 of the Minnesota Rules of Civil Procedure to withhold payments

to a program participant in a program administered by that agency if the agency head

determines that a preponderance of the evidence shows that the program participant has

committed fraud to obtain payments under the program.

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Subd. 5.

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Report.

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(a) An agency that has withheld a payment under this section must

report the following to the commissioner of management and budget by March 1, 2026:

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(1) the number of program participants from whom payments have been withheld;

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(2) a description of the reason the payments were withheld from the program participant;

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(3) the dollar amount of payments withheld;

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(4) the identification of the program;

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(5) whether the payments withheld were state or federal funds; and

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(6) whether the withholding of payment was challenged by a program participant and

the outcome of the challenge.

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(b) The commissioner of management and budget must compile the reports from the

agencies under paragraph (a) and submit the compiled report to the chairs and ranking

minority members of the committees in the house of representatives and the senate with

jurisdiction over state government, judiciary, health and human services, and education by

March 15, 2026.

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Subd. 6.

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Sunset.

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This section expires July 1, 2027.

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Subdivision 1.

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Definitions.

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(a) For purposes of this section, the following terms have

the meanings given.

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(b) "Credible allegation of fraud" means an allegation of fraud that has been verified by

the head of a state agency from any source, including but not limited to fraud complaints;

patterns identified through audits, civil cases, law enforcement investigations, or

investigations by other state or federal agencies; and court filings and other legal documents,

including but not limited to police reports, complaints, indictments, information, affidavits,

declarations, and search warrants.

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(c) "Fraud" means an intentional or deliberate act to deprive another of property or

money or to acquire property or money by deception or other unfair means. Fraud includes

intentionally submitting false information to a federal, state, or local government entity for

the purpose of obtaining a greater compensation or benefit than that to which the person is

legally entitled. Fraud also includes acts which constitute a crime against any program, or

the attempts or plans to commit a crime against any program, including but not limited to

theft in violation of section 609.52; perjury in violation of section 609.48; and aggravated

forgery and forgery in violation of sections 609.542, 609.625, and 609.63, and substantially

similar federal laws.

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(d) "Individual" means a natural person.

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(e) "Program" means any program funded by a state or federal agency that involves the

transfer or disbursement of public funds or other public resources.

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(f) "Program participant" means any entity or individual that receives, disburses, or has

custody of funds or other resources transferred or disbursed under a program.

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(g) "State agency" means any department or agency of the state as defined in sections

15.01 and 15.012.

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Subd. 2.

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Withholding of payments.

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(a) Except as otherwise authorized and to the extent

permitted by federal law, the head of any state agency may withhold payments to a program

participant in any program administered by that agency if the agency head determines the

program participant is the subject of a credible allegation of fraud under investigation that

is related to any program administered by that agency. The head of any agency may also

withhold payments to a program participant in any program administered by that agency if

another agency head has determined there is a credible allegation of fraud under investigation

and the program participant is a subject of the investigation.

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(b) Notwithstanding subdivision 3, the state agency head must send notice of the

withholding of payments to the program participant within five days of taking such action.

The notice must:

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(1) state that payments are being withheld in accordance with this section;

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(2) state the reasons for withholding payments, but need not disclose specific information

concerning an ongoing investigation;

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(3) state that the withholding is for a temporary period and cite the circumstances under

which withholding shall be terminated; and

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(4) inform the program participant of the right to submit written evidence for

consideration by the state agency head.

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(c) Following notice, to the extent practicable, the agency must ensure that any person

whose public funds are interrupted and who is not implicated in the suspected fraud receives

notice of their rights to continued receipt of the public funds, services, or programs for

which they are eligible. The agency head must provide a point of contact for persons

impacted.

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(d) If the agency head withholds payments under this subdivision, the provider, vendor,

individual, associated individual, or associated entity has a right to request administrative

reconsideration. A request for administrative reconsideration must be made in writing,

stating with specificity the reasons the payment withholding decision is in error, and include

documents to support the request. Within 60 days after receipt of the request, the agency

head shall judiciously review allegations, facts, evidence available to the agency head and

information submitted by the provider, vendor, individual, associated individual, or associated

entity to determine whether the payment withholding should remain in place.

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(e) The withholding of payments shall not continue after the state agency head determines

there is insufficient evidence of fraud by the program participant, or after legal proceedings

relating to the alleged fraud are completed, unless the state agency head is authorized by

law to take additional action against the program participant and complies with all

requirements in law to take such action.

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(f) The withholding of payments is a temporary action and is not subject to appeal under

chapter 14.

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(g) This section does not supersede any other section of law authorizing withholding of

payments, including but not limited to sections 127A.21, subdivision 5; 142A.12, subdivision

5; 245.095, subdivision 5; and 256B.064, subdivision 2, paragraph (b).

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Subd. 3.

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Data classification and access.

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(a) During the payment withholding period

under this section, all data relating to a credible allegation of fraud and withholding of

payments under this section are classified as: (1) confidential data on individuals pursuant

to section 13.02, subdivision 3; or (2) protected nonpublic data pursuant to section 13.02,

subdivision 13, in the case of data not on individuals. The agency head may disclose that

payments are being withheld from a program participant if the agency head determines that

doing so will not compromise an ongoing investigation.

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(b) Except for the identity of a complainant, after a determination has been made under

subdivision 2, paragraph (e), that withholding of payments shall not continue, all data relating

to a credible allegation of fraud and withholding of payments under this section become

public unless classified otherwise under state or federal law. The identity of a complainant

is private.

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(c) Any state agency may disclose any data classified as confidential or protected

nonpublic under this section to any federal, state, or local government agency, or any law

enforcement agency, if the state agency determines that access will help prevent fraud

against public programs or aid the law enforcement process.

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