Minnesota Audit: Agency’s ‘Fraud’ Definition Mistakenly Omitted Kickbacks

Payments to suspected fraudsters continued because of an error that has remained uncorrected since 1995, the Office of Legislative Auditor found.

A view outside the Minnesota State Capitol building in Minneapolis, Minn., on June 20, 2020. Stephen Maturen/Getty Images

A state agency erred when it blocked autism-services kickbacks from being investigated—a decision based on the agency’s flawed, decades-old definition of “fraud,” according to a Minnesota audit released March 17.

That was the key finding of the state’s Office of Legislative Auditor, a state watchdog that conducted a two-year special review. The autism-services program that auditors examined is among many health and welfare benefits that Minnesota’s Department of Human Services runs or oversees.

For months, Minnesota has been a focal point for government-program fraud that could total billions of dollars, with dozens of people, mostly Somalis, having been charged and convicted since 2022. Additional schemes emerged late last year and remain under investigation, with more charges expected, prosecutors have said.

Concerns about fraud have recently expanded nationwide. On March 16, President Donald Trump signed an executive order creating an anti-fraud task force. Saying that other states such as California and New York may have fraud problems that are worse than Minnesota’s, the president directed Vice President JD Vance and Federal Trade Commission Chairman Andrew Ferguson to root out fraud in federally funded social services and welfare programs.

During the Minnesota audit, investigators told auditors that they believed they lacked “authority to investigate allegations of kickbacks” in the autism program without additional claims of “fraud, theft, abuse, or error.”

The department’s fraud definition, set in 1995, failed to specifically include “kickbacks.” Those are payments or “anything of value” to induce referrals to providers of federally funded health care—a practice that is illegal under federal law, the report noted.

Auditors opined that the department had misapplied or misinterpreted a rule that includes that fraud definition. The agency had the power to amend the rule and correct an erroneous federal-law citation “without any legislative action,” the report stated.

“Had [the department] done so at any point since 1995, it would have had clear authority to suspend payments” to providers who were strongly suspected in kickback schemes, according to the report.

Auditors recommended that the agency amend its fraud definition “to clearly include kickbacks"—or lawmakers should do so, the report says.

James Clark, inspector general for the state Department of Human Services, said the department agrees with that recommendation.

However, in his written response appended to the report, Clark said the standard rulemaking process could take a year or two to complete, unless officials or lawmakers agree to fast-track it.

The autism-services program, which has operated in Minnesota since 2013, aims to provide “early intervention” for autism-diagnosed patients who are under age 21.

Under the program, providers receive reimbursement for services rendered.

Federal prosecutors have brought charges against at least two people for alleged autism-services fraud in Minnesota.

Late last year, prosecutors also said that many more suspects remained under investigation for allegedly failing to provide autism services—or for allegedly paying kickbacks to parents who fraudulently enrolled their children for services they didn’t need or never received.

The number of Minnesota autism-service businesses grew from about 150 in 2020 to more than 500 in 2024. Similarly, the number of autism-service recipients nearly tripled during that period, from about 1,400 patients in 2020 to more than 5,600 patients in 2024.

During that same timeframe, the program’s cost burgeoned from about $38 million to nearly $325 million.

Faced with that dramatic expansion and other concerns, lawmakers strengthened state laws in 2025, the legislative auditor’s report noted.

Auditors examined complaints that the state Department of Human Services’ investigative division received between July 2017 and February 2024.

That sample included seven completed investigations that were handled appropriately, auditors concluded.

However, among 25 complaints that were dismissed without further investigation, three involved alleged kickbacks. The auditors concluded the agency should have done more in those instances.

The auditors’ report does not disclose dollar amounts of the alleged kickbacks, nor does it say whether the faulty definition of fraud could have affected other state-administered programs.