Office of the Inspector General provisions within the Department of Education modification

A bill for an act

relating to education; modifying provisions for the Office of the Inspector General

within the Department of Education; providing for access to records by the Office

of the Inspector General; classifying data; providing for immunity and

confidentiality in reporting or participating in an investigation; establishing a

process for notice, appeal, and withholding of payments; amending Minnesota

Statutes 2024, section 127A.21, subdivisions 1, 1a, 4, 6, by adding subdivisions;

Minnesota Statutes 2025 Supplement, sections 13.82, subdivision 1; 127A.21,

subdivision 5; proposing coding for new law in Minnesota Statutes, chapter 13.

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

Section 1.

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[13.3211] DEPARTMENT OF EDUCATION OFFICE OF THE

INSPECTOR GENERAL; INVESTIGATIVE DATA.

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(a) Data on persons that are collected, maintained, used, or disseminated by the

Department of Education in an investigation conducted under section 127A.21 are

confidential data on individuals pursuant to section 13.02, subdivision 3, or protected

nonpublic data on an individual pursuant to section 13.02, subdivision 13, and shall not be

disclosed except:

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(1) pursuant to section 13.05;

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(2) pursuant to statute or valid court order;

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(3) to a party named in a civil or criminal proceeding for preparation of a defense;

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(4) to an investigator acting on behalf of a county, state, or federal government, including

a law enforcement officer or attorney in the investigation or prosecution of a criminal, civil,

or administrative proceeding, unless the inspector general determines that disclosure may

compromise an investigation; or

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(5) to provide notices required or permitted by statute.

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(b) The data referred to in this section shall be classified as public data upon submission

to a court in a civil or criminal proceeding, or when the investigation is no longer being

pursued actively, except that the data shall be disclosed as required to comply with section

6.67 or 609.456, unless chapter 13 provides otherwise.

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(c) Notwithstanding paragraph (a), the existence of an investigation conducted by the

Office of the Inspector General or withholding of payment by the commissioner may be

disclosed if the commissioner, after consulting with the inspector general, determines that

it will not compromise the investigation.

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EFFECTIVE DATE.

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This section is effective the day following final enactment.

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Sec. 2.

Minnesota Statutes 2025 Supplement, section 13.82, subdivision 1, is amended to

read:

Subdivision 1.

Application.

This section shall apply to agencies which carry on a law

enforcement function, including but not limited to municipal police departments, county

sheriff departments, fire departments, the Bureau of Criminal Apprehension, the Minnesota

State Patrol, the Board of Peace Officer Standards and Training,
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the Office of the Inspector

General within the Department of Education,
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and county human service agency client and

provider fraud investigation, prevention, and control units operated or supervised by the

Department of Human Services.

Sec. 3.

Minnesota Statutes 2024, section 127A.21, subdivision 1, is amended to read:

Subdivision 1.

Establishment of Office of the Inspector General; powers; duties.

The

commissioner must establish within the department an Office of the Inspector General. The

inspector general shall report directly to the commissioner. The Office of the Inspector

General is charged with protecting the integrity of the department and the state by detecting

and preventing fraud,
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theft,
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waste, and abuse in department programs. The Office of the

Inspector General must conduct independent and objective investigations to promote the

integrity of the department's programs and operations. When fraud
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, theft,
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or other misuse

of public funds is detected, the Office of the Inspector General must report it to the

appropriate law enforcement entity and collaborate and cooperate with law enforcement to

assist in the investigation and any subsequent civil and criminal prosecution.

Sec. 4.

Minnesota Statutes 2024, section 127A.21, subdivision 1a, is amended to read:

Subd. 1a.

Definitions.

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

meanings given.

(b) "Abuse" means actions that may, directly or indirectly, result in unnecessary costs

to department programs. Abuse may involve paying for items or services when there is no

legal entitlement to that payment
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.
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,
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or behavior that is deficient or improper when compared

with behavior that a prudent person would consider a reasonable and necessary business

practice given the facts and circumstances.
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(c) "Department program" means a program funded by the Department of Education

that involves the transfer or disbursement of public funds or other resources to a program

participant. "Department program" includes state and federal aids or grants received by a

school district or charter school or other program participant.

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(d) "Excluded" means removed by any means from a program administered by a

Minnesota state agency or federal agency.

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(d)
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(e)
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"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 the department for the purpose of
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either
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obtaining a greater compensation or benefit than that to which the
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person
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program participant
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is legally entitled
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or hiding the misuse of funds
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.
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Fraud also includes failure to correct errors

in the maintenance of records in a timely manner after a request by the department.
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Fraud

also includes acts that constitute a crime against any program, or attempts or conspiracies

to commit those crimes, including but not limited to the following:
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(1) theft in violation of section 609.52;

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(2) perjury in violation of section 609.48; and

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(3) aggravated forgery and forgery in violation of sections 609.625 and 609.63.

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(e)
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(f)
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"Investigation" means an audit, investigation, proceeding, or inquiry by the Office

of the Inspector General related to a program participant in a department program.

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(f)
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(g)
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"Program participant" means any entity or person, including associated
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entities

or
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persons, that receives, disburses, or has custody of funds or other resources transferred

or disbursed under a department program.
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Associated persons or entities include but are not

limited to vendors or other entities or persons that contract with recipients of department

program funds.
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(h) "Theft" means the act defined in section 609.52, subdivision 2.

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(g)
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(i)
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"Waste" means practices that, directly or indirectly, result in unnecessary costs

to department programs, such as misusing resources.
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Waste includes an attempt or act using

or expending resources carelessly, extravagantly, or to no purpose.
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(h)
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(j)
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For purposes of this section, neither "fraud,"
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"theft,"
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"waste," nor "abuse" includes

decisions on instruction, curriculum, personnel, or other discretionary policy decisions made

by a school district, charter school, cooperative unit as defined by section
123A.24,

subdivision
2, or any library, library system, or library district defined in section
134.001
.

Sec. 5.

Minnesota Statutes 2024, section 127A.21, subdivision 4, is amended to read:

Subd. 4.

Access to records.

(a) For purposes of an investigation, and regardless of the

data's classification under chapter 13, the Office of the Inspector General shall have access

to all relevant books, accounts, documents, data, and property related to department programs

that are maintained by a program participant, charter school, or government entity as defined

by section
13.02
.

(b) Notwithstanding paragraph (a), the Office of the Inspector General must issue a

subpoena under subdivision 3 in order to access routing and account numbers to which

Department of Education funds have been disbursed.

(c) Records requested by the Office of the Inspector General under this subdivision shall

be provided in a format, place, and time frame reasonably requested by the Office of the

Inspector General.

(d) The department may enter into specific agreements with other state agencies related

to records requests by the Office of the Inspector General.

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(e) In an investigation, program participants must give the Office of the Inspector General

immediate access without prior notice to any locations of potential record storage and the

records themselves, whether physical or electronic, during regular business hours, and to

any records related to a department program. Denying the Office of the Inspector General

access to requested records is cause for immediate suspension of payment.

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(f) The Office of the Inspector General, at its own expense, may photocopy or otherwise

duplicate any record related to a department program. Photocopying or electronic duplication

shall be done on the program participant's premises when immediate access is requested,

unless removal is specifically permitted by the program participant. If requested, a program

participant must help the Office of the Inspector General duplicate any department program

record or other records related to a department program's operation, including hard copies

or electronically stored data, on the day when access is requested.

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Sec. 6.

Minnesota Statutes 2025 Supplement, section 127A.21, subdivision 5, is amended

to read:

Subd. 5.

Sanctions; appeal.

(a) This subdivision does not authorize any sanction that

reduces, pauses, or otherwise interrupts state or federal aid to a school district, charter school,

cooperative unit as defined by section
123A.24, subdivision 2
, or any library, library system,

or library district defined in section
134.001
.

(b) The inspector general may recommend that the commissioner impose appropriate
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temporary
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sanctions
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, including withholding of payments under the department program,
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on

a program participant
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pending an investigation by the Office of the Inspector General
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if:

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(1) during the course of an investigation, the Office of the Inspector General finds credible

indicia of fraud, waste, or abuse by the program participant;

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(2)
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(1)
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there has been a criminal, civil, or administrative adjudication of fraud,
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waste,

or abuse
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theft, or misuse
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against the program participant in Minnesota or in another state

or jurisdiction;
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or
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(3) the program participant was receiving funds under any contract or registered in any

program administered by another Minnesota state agency, a government agency in another

state, or a federal agency, and was excluded from that contract or program for reasons

credibly indicating fraud, waste, or abuse by the program participant; or

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(4)
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(2)
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the program participant has a pattern of noncompliance with an investigation.

(c) If an investigation finds, by a preponderance of the evidence, fraud,
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waste, or abuse
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theft, or misuse
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by a program participant, the inspector general may, after reviewing all

facts and evidence and when acting judiciously on a case-by-case basis, recommend that

the commissioner impose appropriate sanctions on the program participant.

(d) Unless prohibited by law, the commissioner has the authority to implement

recommendations by the inspector general, including imposing appropriate sanctions,

temporarily or otherwise, on a program participant. Sanctions may include ending program

participation, stopping disbursement of funds or resources, monetary recovery, and

termination of department contracts with the participant for any current or future department

program or contract. A sanction may be imposed for up to the longest period permitted by

state or federal law. Sanctions authorized under this subdivision are in addition to other

remedies and penalties available under law.

(e) If the commissioner imposes sanctions on a program participant under this subdivision,

the commissioner must notify the participant in writing within seven business days of

imposing the sanction, unless requested in writing by a law enforcement agency to

temporarily delay issuing the notice to prevent disruption of an ongoing law enforcement

agency investigation. A notice of sanction must state:

(1) the sanction being imposed;

(2) the general allegations that form the basis for the sanction;

(3) the duration of the sanction;

(4) the department programs to which the sanction applies; and

(5) how the program participant may appeal the sanction pursuant to paragraph (f).

(f) A program participant sanctioned under this subdivision may, within 30 days after

the date the notice of sanction was mailed to the participant, appeal the determination by

requesting in writing that the commissioner initiate a contested case proceeding under

chapter 14. The scope of any contested case hearing is limited to the sanction imposed under

this subdivision. An appeal request must specify with particularity each disputed item, the

reason for the dispute, and must include the name and contact information of the person or

entity that may be contacted regarding the appeal.

(g) The commissioner
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shall
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may
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lift sanctions imposed under this subdivision if the

Office of the Inspector General
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determines
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notifies the commissioner that is has determined
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there is insufficient evidence of fraud,
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waste, or abuse
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theft, or misuse
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by the program

participant. The commissioner must notify the participant in writing within seven business

days of lifting the sanction.

Sec. 7.

Minnesota Statutes 2024, section 127A.21, subdivision 6, is amended to read:

Subd. 6.

Data practices.

(a) It is not a violation of rights conferred by chapter 13 or any

other statute related to the confidentiality of government data for a government entity as

defined in section
13.02
to provide data or information under this section.

(b) The inspector general is subject to the Government Data Practices Act, chapter 13,

and shall protect from unlawful disclosure data classified as not public. Data collected,

created, received, or maintained by the inspector general relating to an
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audit,
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investigation,

proceeding, or inquiry are subject to
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section
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sections 13.3211,
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13.39
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, and 13.82
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.

Sec. 8.

Minnesota Statutes 2024, section 127A.21, is amended by adding a subdivision to

read:

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Subd. 8.

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Immunity and confidentiality.

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(a) A person who makes a good faith report

is immune from any civil liability that might otherwise arise from reporting or participating

in the investigation. Nothing in this subdivision affects an individual's or entity's

responsibility for any monetary recovery under existing law or contractual obligation when

receiving public funds.

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(b) For purposes of this subdivision, "person" means a natural person.

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(c) After an investigation is complete, the reporter's name and any identifying information

must be kept confidential. The subject of the report may compel disclosure of the reporter's

name only with the consent of the reporter or upon a written finding by a district court that

the report was false and there is evidence that the report was made in bad faith. This

subdivision does not alter disclosure responsibilities or obligations under the Rules of

Criminal Procedure, except that when the identity of the reporter is relevant to a criminal

prosecution the district court shall conduct an in-camera review before determining whether

to order disclosure of the reporter's identity.

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Sec. 9.

Minnesota Statutes 2024, section 127A.21, is amended by adding a subdivision to

read:

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Subd. 9.

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Limits on receiving public funds; prohibition.

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(a) This subdivision does not

authorize any action that reduces, pauses, or otherwise interrupts state or federal aid to a

school district, charter school, cooperative unit as defined in section 123A.24, subdivision

2, or any library, library system, or library district defined in section 134.001.

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(b) For purposes of this subdivision, "program participant" includes individuals or persons

who have an ownership interest in, control of, or the ability to control a program participant

in a department program.

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(c) If a program participant is excluded from a department program, the inspector general

shall notify the commissioner, who shall:

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(1) prohibit the excluded program participant from enrolling in, receiving grant money

from, or registering in any other program administered by the commissioner; and

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(2) disenroll or disqualify the excluded program participant from any other program

administered by the commissioner.

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(d) If a program participant enrolled, licensed, or receiving funds under any contract or

program administered by a Minnesota state agency or federal agency is excluded from that

program, the inspector general shall notify the commissioner, who may:

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(1) prohibit the excluded program participant from enrolling in, becoming licensed,

receiving grant money from, or registering in any other program administered by the

commissioner; and

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(2) disenroll or disqualify the excluded program participant from any other program

administered by the commissioner.

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(e) The duration of a prohibition, disenrollment, revocation, suspension, or

disqualification under paragraph (c) must last for the longest applicable sanction or

disqualifying period in effect for the program participant permitted by state or federal law.

The duration of a prohibition, disenrollment, revocation, suspension, or disqualification

under paragraph (d) may last up until the longest applicable sanction or disqualifying period

in effect for the program participant as permitted by state or federal law.

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Sec. 10.

Minnesota Statutes 2024, section 127A.21, is amended by adding a subdivision

to read:

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Subd. 10.

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Notice.

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Within five days of taking an action against a program participant

under subdivision 9, paragraph (c) or (d), the commissioner must send notice of the action

to the program participant. The notice must state:

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(1) the basis for the action;

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(2) the effective date of the action;

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(3) the right to appeal the action; and

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(4) the requirements and procedures for reinstatement.

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Sec. 11.

Minnesota Statutes 2024, section 127A.21, is amended by adding a subdivision

to read:

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Subd. 11.

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Appeal.

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(a) Upon receipt of a notice under subdivision 10, a program

participant may request a contested case hearing, as defined in section 14.02, subdivision

3, by filing with the commissioner a written request of appeal. The appeal request must be

received by the commissioner no later than 30 days after the date the notification was mailed

to the program participant.

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(b) The appeal request must specify: (1) each disputed item and the reason for the dispute;

(2) the authority in statute or rule upon which the program participant relies for each disputed

item; (3) the name and address of the person or entity with whom contacts may be made

regarding the appeal; and (4) other information required by the commissioner.

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(c) Unless timely and proper appeal is received by the commissioner, the action of the

commissioner shall be considered final and binding on the effective date of the action as

stated in the notice under subdivision 10, clause (2).

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Sec. 12.

Minnesota Statutes 2024, section 127A.21, is amended by adding a subdivision

to read:

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Subd. 12.

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Withholding of payments.

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(a) This subdivision does not authorize withholding

of payments that reduces, pauses, or otherwise interrupts state or federal aid to a school

district, charter school, cooperative unit as defined in section 123A.24, subdivision 2, or

any library, library system, or library district defined in section 134.001.

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(b) Except as otherwise provided by state or federal law, the inspector general shall

notify and recommend to the commissioner to withhold payments to a program participant

in any program administered by the commissioner, to the extent permitted under federal

law, if the commissioner determines there is a credible allegation of fraud or theft for which

an investigation is pending for a program administered by the department, a Minnesota state

agency, or a federal agency.

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(c) Allegations are considered credible when they have indicia of reliability and the

inspector general has reviewed the evidence and acts on a case-by-case basis. A credible

allegation of fraud is an allegation that has been verified by the commissioner from any

source, including but not limited to:

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(1) fraud hotline complaints;

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(2) claims data mining; and

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(3) patterns identified through provider audits, civil false claims cases, and investigations.

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(d) The commissioner must send notice of the withholding of payments within five days

of taking such action. The notice must: (1) state that payments are being withheld according

to this paragraph; (2) set forth the general allegations as to the reasons for the withholding

action, but need not disclose any specific information concerning an ongoing investigation;

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

which withholding will be terminated; and (4) inform the program participant of the right

to submit written evidence for consideration by the commissioner.

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(e) The withholding of payments shall not continue after the commissioner determines

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

relating to the alleged fraud are completed, unless the commissioner has sent notice under

subdivision 5 of the intention to take an additional action related to the program participant's

participation in a program administered by the commissioner.

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

under this subdivision or chapter 14.

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Sec. 13.

Minnesota Statutes 2024, section 127A.21, is amended by adding a subdivision

to read:

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Subd. 13.

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Program participant records retention.

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(a) The department must ensure

properly maintained records of external program participants and individuals that receive

money from the department.

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(b) All program participants who received program money before August 1, 2026, must

retain records as part of the department program participant record retention laws, program

rules, or contracts.

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(c) Starting August 1, 2026, all current department program participants must comply

with the record retention requirements in paragraph (d). Program participants must comply

at a minimum with this subdivision, in addition to other laws, program rules, or contracts

that may require additional records to be retained or require that records are retained for a

longer period of time.

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(d) The following records must be maintained, controlled, and made immediately

accessible to the department, including the Office of the Inspector General. The records

must be organized and labeled to correspond to categories that make them easy to identify

so that they can be made available immediately upon request at the program participant's

place of business:

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(1) payroll ledgers, canceled checks, bank deposit slips, budgets, reconciliation records,

tax records, and other accounting records;

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(2) communication related to financial management or the failure to meet generally

accepted standards of fiscal management;

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(3) daily attendance records, if required, or when the department program payment is

based on attendance;

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(4) remittance payment records from the department program and any adjusted records;

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(5) employee records identifying those persons currently employed by the program

participant or who have been employed or paid by at any time within the previous six years.

The records must include each employee's name, hourly and annual salary, qualifications,

position description, job title, and dates of employment. In addition, employee records must

be available and include the employee's time sheets, current or last known address of the

employee, documentation of background studies required pursuant to chapter 245C, and

documentation related to credentials and licenses;

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(6) records of independent contractors, entities, or individuals paid using department

program money, including identifying information, contracts, payments, or other related

records; and

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(7) records that are required to be maintained by law or contract by a program participant

when receiving department program money.

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(e) A program participant must retain all records under paragraph (d) for at least six

years from the date department program money was dispersed to the program participant,

unless other laws, program rules, or contracts require records to be retained for a longer

period of time. In the event of an appealed case, the program participant must retain all

records for the duration of the appeal or six years, whichever is longer.

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(f) A program participant who withdraws or is excluded from a department program

must retain records listed under paragraph (d) for at least six years and make them available

to the department on demand and notify the department of who is responsible for maintaining

the records, including full name, date of birth, and contact information.

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(g) If the ownership of a program participant changes, the transferor, unless otherwise

provided by law or by written agreement with the transferee, is responsible for maintaining,

preserving, and upon request from the department, making available the records related to

the program participant that were generated before the date of the transfer. Any written

agreement affecting this provision must be held in the possession of the transferor and

transferee for six years after the agreement is fully executed. The executed agreement must

be shared with the department program within 30 days of execution of the transfer agreement.

The written agreement must be provided to the department including the Office of the

Inspector General immediately upon request.

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(h) A program participant's use of electronic record keeping or electronic signatures is

governed by the Uniform Electronic Transactions Act under chapter 325L.

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EFFECTIVE DATE.

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This section is effective the day following final enactment.

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