Minnesota House fraud committee asks legislators to stop giving money directly to nonprofits
Chair of the House Fraud Prevention and State Agency Oversight Policy Committee Rep. Kristin Robbins, R-Maple Grove, spoke at a Capitol press conference on March 24, 2025. Photo by Michelle Griffith/Minnesota Reformer.
A bipartisan group of Minnesota lawmakers from the House Ways and Means Committee and a fraud prevention committee asked their fellow legislators to refrain from earmarking funds directly to nonprofits without a competitive grant process this year.
Legislators from both parties for years have been giving taxpayer funds directly to nonprofits to complete government work, such as preventing violence or providing food to needy families.
State agencies typically award a grant to a nonprofit after performing background checks and analyzing numerous proposals, ultimately giving it to the applicant that best meets their criteria. But Minnesota lawmakers can also go around that competitive process and directly name a nonprofit, granting funds in a budget bill through what are known as legislatively named grants.
Those grants have been fraught with problems over the years.
The letter to budget-writing lawmakers requests they stop granting money to organizations through legislatively named grants as they draft budget bills for their respective committees in the weeks ahead. The Legislature must pass a two-year budget by June 30, though the Legislature is scheduled to adjourn May 19.
'When you appropriate funds to private entities, we urge you to strongly consider having agencies use a competitive process to select those entities, rather than directly naming them in law,' lawmakers wrote.
Legislators are able to propose whatever bills they like, so there's little stopping them from continuing to name nonprofits in bills and granting them funds — other than asking them nicely like in the Wednesday letter.
In 2023, the Democratic-Farmer-Labor-led Legislature approved over $1.1 billion in legislatively named grants to nonprofits, with some receiving more money from lawmakers than they normally get in other grants and donations in an entire year.
According to a 2023 audit, Minnesota struggles to oversee money it sends out the door. The Office of the Legislative Auditor found 'pervasive noncompliance' with grant management policies, 'signaling issues with accountability and oversight' of the $500 million the state sends out in a typical year.
Both competitive and legislatively named grants are supposed to go through the same type of oversight by state agencies, but the Office of the Legislative Auditor has found that agencies have failed to provide the same oversight of legislatively named grants that they do for competitive grants.
The OLA has recommended lawmakers stop using legislatively named grants since 2007, or the year the first iPhone was released.
Proponents of legislatively named grants say the practice allows smaller, less-established nonprofits an opportunity to receive state funding, as they may be disregarded in a competitive process. A competitive process can also be unnecessary if, for example, a nonprofit is the only organization in an area of Minnesota that provides a particular service, proponents say.
'Direct appropriations may be the best fit for some circumstances, such as where there is only one private entity that can meet the identified need,' the lawmakers wrote. 'But this should be the rare exception, rather than a general process. Additionally, the entity should be specified by name rather than using a session-law description for which only one entity could qualify.'
Last year, Democratic lawmakers passed a bill requiring companies like Uber and Lyft to contract with a nonprofit advocacy organization to provide driver services. The bill appeared tailored to describe the Minnesota Uber/Lyft Drivers Association. The organization has been accused of fraud and deceptive trade practices by Uber and Lyft drivers.
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