A new report examining fraud risk in Minnesota government programs describes longstanding vulnerabilities dating back to the 1970s and repeated inaction by state leaders despite nearly a half-century of warnings.

Gov. Tim Walz’s director of Program Integrity, Tim O’Malley, on Monday released what he described as a “roadmap” to address those vulnerabilities, which he said were driven in large part by a culture in state agencies “more based on compassion than compliance.”

“That’s misplaced. If state workers want to provide services, want to directly help people in need, then they should go work for a provider. They should deliver the wheelchairs. They should do the bed baths. They should take people to medical appointments,” he said at a news conference announcing the report’s findings. “The state has a responsibility to make sure those things happen by protecting state (taxpayer) money.”

Every governor and Legislature had been made aware of problems in programs for the last 50 years, according to the review, but plans to strengthen protections against fraud in state welfare programs were never executed effectively.

The review can be read at https://tinyurl.com/4z3ufffv.

‘Inadequate accountability’ in agencies

O’Malley’s report comes after allegations of hundreds of millions of dollars of fraud at the Department of Human Services and Department of Education, and speculation that the fraud could reach the billions. Overall, he found that “inadequate accountability” in agencies was largely to blame.

“Recent events have revealed longstanding vulnerabilities in multiple facets of state administration and leadership and priority setting to specific elements such as enrollment, oversight, data sharing and investigative capacity,” the report said. “These weaknesses have been exploited repeatedly over decades by organized networks of providers, intermediaries and recipients, resulting in significant financial losses, erosion of public trust and inadequate delivery of essential services to vulnerable Minnesotans.”

Questions remain about who exactly has been held responsible for fraud in state agencies — if anyone. Past reports from the nonpartisan Office of the Legislative Auditor have pointed to issues with “inadequate oversight” and “pervasive noncompliance” in how the state handles payments and grants.

In December, Walz said there were state employees who should have “done more” and that they were “no longer working in the state.”

Former Human Services Commissioner Jodi Harpstead resigned in January this year, before federal prosecutors brought charges in connection with significant fraud in children’s autism programs and housing stabilization services supported by the agency.

In late 2022, Education Commissioner Heather Mueller announced she would not seek reappointment in Walz’s second term, months after the first charges in the $250 million Feeding Our Future case.

And days before federal prosecutors announced charges tied to housing stabilization in September, it emerged that the assistant commissioner with the program was no longer working with the agency.

Neither DHS nor Walz has said whether Eric Grumdahl, assistant commissioner of Homelessness and Housing Supports, lost his job due to fraud in the program, which was expected to cost $2.6 million a year when it launched but ballooned to over $105 million in 2024.

Fraud czar

Walz, a Democrat, appointed O’Malley in December as scrutiny mounted on his administration’s handling of widespread fraud in state government programs. As program integrity director, O’Malley was tasked with creating fraud prevention measures across agencies and working with the outside financial audit firm WayPoint.

O’Malley was superintendent of the Minnesota Bureau of Criminal Apprehension under Republican Gov. Tim Pawlenty. He’s a former FBI agent and interim chief judge for the state Court of Administrative hearings, and for a decade handled allegations of sexual misconduct by clergy in the Archdiocese of St. Paul and Minneapolis.

When Walz announced his appointment of O’Malley as state fraud czar on Dec. 12, federal investigators estimated Minnesota had lost hundreds of millions of dollars to fraud in recent years, with former assistant U.S. Attorney Joe Thompson speculating total theft could top more than $1 billion.

That estimate ballooned to at least $9 billion just a week later when Thompson announced another round of criminal charges in Medicaid fraud cases. Thompson told reporters he believed more than half of the $18 billion in federal money the state distributed through “high-risk” Medicaid programs since 2018 could have been lost to fraud.

Officials with the Minnesota Department of Human Services have disputed that estimate. Walz, who suspended his campaign for a third term in office just weeks after Thompson’s remarks, described the $9 billion figure as speculative and defamatory.

The report recommends changing agency culture, boosting accountability measures, modernizing technology and oversight.

It also recommends that state lawmakers, who returned to the state Capitol last Tuesday for the 2026 legislative session, pass several bills to support a “modern fraud‑prevention infrastructure.”

They include ending direct appropriations — which present a high risk of fraud — as well as ending grants without dedicated fraud prevention funding and requiring bills that create or modify programs to have a fraud prevention component.

O’Malley told reporters Monday that he had “independence and autonomy” to go where the facts took him and that the governor had not tried to influence his work.

Senate GOP leader calls report ‘lip service’

Senate Minority Leader Mark Johnson, R-East Grand Forks, called the report an example of Walz “lip service” on fraud, saying it was little more than a compendium of existing public issues in state programs.

“They don’t have to wait for the Legislature. They have the tools to really get started if they need help,” he said. “We’re happy to figure out a bipartisan way forward. But the response has been so lackluster. We need to get going on this.”

O’Malley’s hiring was the latest in a series of moves Walz has made to address fraud allegations in state agencies.

In January 2025, the governor directed the creation of a fraud investigation unit at the BCA. The Department of Human Services moved to shut down a Medicaid-funded housing stabilization program beset by fraud after news emerged in July of a federal investigation into several providers.

Earlier this month, a Walz-ordered third-party audit assessing the 14 Minnesota Medicaid programs at high risk for fraud found the state could safeguard $1 billion in the next four years by changing its policies on payment reviews.

State officials described the report as the “first phase” of developing a payment review process for the high-risk programs.

Gandhi permanent appointment

Before O’Malley shared the findings of his report on Monday, Walz announced the permanent appointment of Shireen Gandhi as commissioner of the Minnesota Department of Human Services, which has been the subject of significant fraud allegations recently.

The post had been vacant for more than a year. Gandhi had served as interim commissioner since the resignation of former Human Services Commissioner Jodi Harpstead in January 2025, before federal prosecutors brought charges in connection with significant fraud in children’s autism programs and housing stabilization services supported by the agency.

Walz praised Gandhi for her leadership during troubled times at the agency.

“Over the past year, she has demonstrated steady, decisive leadership at the Minnesota Department of Human Services, strengthening program integrity, rooting out fraud, and ensuring taxpayer dollars reach the Minnesotans who rely on these services,” he said in a news release.

Gandhi will serve in the remaining months of the Walz administration. The governor, who is no longer seeking a third term, leaves office next January.

Republicans welcomed the appointment, calling it “long overdue,” though they expressed skepticism about the governor’s choice.

“Commissioner Gandhi has worked at DHS for years, including in compliance and oversight, while billions of taxpayer dollars were lost to fraud. For the past 13 months, she has served as interim commissioner as Minnesota’s fraud epidemic has made international news,” House Republican Floor Leader Harry Niska, R-Ramsey, said in a statement. “That’s not accountability. That’s failure rewarded.”

 

Gov. Tim Walz has put the Minnesota National Guard on notice in the event of unrest following the fatal shooting of a 37-year-old woman in Minneapolis by an Immigration and Customs Enforcement officer.

Walz says he’s issued a warning order to prepare the Minnesota National Guard in the event of civil unrest. It’s a first step that alerts 13,000 guard members that they may need to be called upon in the event of an emergency.

Addressing reporters on the situation during a Wednesday briefing, Walz said he supported the rights of demonstrators but urged them to engage in peaceful protest.

“What we’re seeing is the consequences of governance designed to generate fear, headlines and conflict,” Walz said. “It’s governing by reality TV, and today, that recklessness cost someone their life.”

He added: “We won’t let them tear us apart. We’ll not turn against each other. To Minnesotans, they say this, I feel your anger. I’m angry. They want a show. We can’t give it to them.”

Like a number of other Democrats in Minnesota, Walz called for federal law enforcement authorities to leave the state.

“I have a very simple message, we do not need any further help from the federal government,” he said. “To Donald Trump and Kristi Noem: you have done enough.”

Meanwhile, state Department of Public Safety Commissioner Bob Jacobson urged “safe and lawful” protests and warned that actions like blocking freeways or damaging property could result in fines and arrest.

“We fully expect that the community will want to peacefully demonstrate their anger or frustration. Minnesota residents and visitors have the right to peacefully demonstrate,” Jacobson said. “Our focus is keeping demonstrators, community members, drivers and law enforcement safe, especially during moments of heightened tension or uncertainty.”

Reactions

A number of statements via social media and email from politicians ranged outrage over ICE’s actions and presence in the Twin Cities to support for federal law enforcement.

President Donald Trump, in a social media post, described the victim as a “professional agitator” and said video of the incident shows the ICE agent acting in self-defense.

“Based on the attached clip, it’s hard to believe he’s still alive” Trump said. He went on to blame “The Radical Left” for threatening law enforcement.

State Attorney General Keith Ellison, in a statement, said he was “very angry.”

“Like so many Minnesotans, I’m heartbroken. I’m also angry. Very angry. For weeks, we’ve watched the Trump administration deliberately brutalize our communities, and now an ICE agent has fatally shot one of our neighbors,” Ellison said. “The president is deliberately weaponizing the federal government against the people of Minnesota to inflict pain and instill terror. We must stand up to this horrendous injustice, and in doing so, we must not stoop to Donald Trump’s level. We’re right to be heartbroken and angry, but we cannot give Donald Trump the excuse he wants to continue escalating this violence against Minnesotans.”

Ellison said residents should “protest peacefully, organize your communities, and stand up for one another. I will continue to do everything in my power to oppose this brutality, ensure justice is served, and keep Minnesotans safe. Right now, I think nothing would keep Minnesotans safer than seeing ICE leave our state, and take their chaos, pain, and violence with them.”

U.S. Sen. Amy Klobuchar, in a statement, said the incident was “the result of the administration sending federal agents onto our streets against the wishes of local law enforcement, including our respected (Minneapolis) Police Chief Brian O’Hara. We need full transparency and an investigation of what happened, and I am deeply concerned that statements made by (the U.S. Department of Homeland Security) do not appear to reflect video evidence and on-the-ground accounts. While our immigration enforcement should be focused on apprehending and prosecuting violent criminals to make our communities safer, these ICE actions are doing the opposite and making our state less safe.”

U.S. Rep. Betty McCollum, a Democrat from St. Paul, called on ICE agents to leave the state.

“ICE must immediately cease and desist their actions in Minnesota to allow state and local law enforcement officials to restore order, prevent further violence, and conduct a full, independent, and transparent investigation into ICE’s actions and conduct which caused this horrific shooting,” McCollum said. “Minnesotans are justified in their anger. As Minnesotans, we demand accountability and justice. We have a fundamental right to express our first amendment freedoms through peaceful protest. We must not fall into Trump’s trap of division and violence. We can show the world the best of Minnesota values – our compassion, our respect for the dignity of each of our neighbors, and our belief in justice for all.”

In a social media post U.S. Tom Emmer, a Sixth District Republican, posted on X his support for federal law enforcement.

“I pray that every federal law enforcement officer on the ground in Minnesota right now remains safe as they carry out their vital mission. Tim Walz and Jacob Frey are cowards who are inciting violence to distract from their own failures. It’s dangerous. Stay safe, @ICEgov.”

St. Paul mayor, others

St. Paul Mayor Kaohly Her said in a social media post that she was monitoring the situation in Minneapolis.

“My heart is broken for the victim, their family, and our community as a whole,” Her said. “I join Mayor Frey in demanding that ICE leave our cities immediately before they cause any further harm.”

Senate Majority Leader Erin Murphy, DFL- St. Paul, in a statement, said she was “devastated and furious.”

“A weak president sent ICE agents to Minnesota to sow chaos without regard for human life, and today’s killing is the predictable outcome,” Murphy said. “This federal government is using violence to force us into fearful silence and compliance, and a woman is dead because of it. ICE should never have been in Minnesota, and they need to leave now.

“I denounce these actions, and I will fight with all I have for our freedom and safety. I urge us all, even as we feel our rage and our grief, to remain calm; more innocent people cannot be hurt. We demand accountability — and the truth — from the President, Secretary Noem, ICE officials, and those involved in the shooting.”

Senate Minority Leader Mark Johnson, R-East Grand Forks, in a statement, said “peaceful protest is a cornerstone of our democracy and must be protected, but endangering law enforcement officers is never acceptable.”

Johnson added: “I offer my condolences to the family grieving the loss of a loved one and urge everyone to step back, de-escalate, and let investigators fully examine the facts of what occurred.”

David Titus, Minnesota Police and Peace Officers Association’s interim executive director, said the association stands “firmly behind law enforcement officers, accountability under the law, and the safety of every Minnesota community.

“Irresponsible, reckless rhetoric from political leaders attacking law enforcement has real and dangerous consequences for officers on the street,” he said in a statement. “When officers are vilified, demonized, or used as political props, it fuels hostility, emboldens bad actors, and puts lives directly at risk.”