HF3395
Fraud Isn't Free Act established; corrective action plans, enrollment freezes, agency budget reductions, and employee dismissal required when fraud is committed against a program administered by the state; and other fraud prevention provisions established.
Legislative Session 94 (2025-2026)
Related bill: SF3793
AI Generated Summary
Purpose
- Establishes the Fraud Isnt Free Act to address fraud in programs administered by the state.
- Requires corrective action plans, enrollment freezes, budget reductions, and employee dismissal when fraud is found.
- Adds fraud considerations to state budget forecasts.
- Repeals the expiration of agency payment withholding authority and makes related amendments to statutes.
Key Definitions and Scope
- Fraud: an intentional or deliberate act to deprive someone of property or money or to obtain property or money by deception; includes submitting false information to government entities to obtain greater compensation or benefits; includes crimes against any program and related attempts or plans.
- Program: any state- or federally funded program that transfers or disburses public funds or resources.
- Law enforcement agency: state or local entities with criminal investigation power.
- Agency: the state agency that administers a program (including Minnesota State Colleges and Universities).
Main Provisions and Actions Triggered by Fraud
- Reporting and timeline: when fraud is suspected, the agency head must report the total estimated amount and take required actions within 30 days of withholding payments or completion of an investigation; report to the commissioner of management and budget and the Legislative Audit Commission.
- Corrective action plan: the agency head must create and submit a corrective action plan detailing the suspected fraud, the amount, responsible staff, steps taken or planned to prevent future fraud (including staff dismissal or training), recommended changes to state law, and the plan to recover fraudulently obtained money.
- Enrollment suspension: the agency must suspend further enrollment in the affected program until requirements are completed.
- Leadership and employee dismissal: the agency head must discharge employees whose actions contributed to the fraud (including deputies, assistants, or division heads responsible for the program); dismissal follows the state’s standard procedures; the discharged person may not be employed by the state for five years.
- Law enforcement notification: when investigations are completed and referred for prosecution, the agency must promptly notify the agency head and Legislative Audit Commission, identify suspects and the program, summarize evidence, and treat the information as criminal investigative data.
Budget Reductions and Financial Consequences
- Immediate budget reductions: upon receiving a fraud report, the commissioner must reduce unexpended allotments for the agency’s administration or central office by 10% and reduce the agency head’s salary by 25% (subject to existing salary laws); may defer or suspend other obligations to make these reductions.
- Base reductions for next biennium: reduce the appropriation base for agency administration by 10% and the base for agency head salary by 25% for the subsequent biennium.
- Conditions to continue reductions: reductions continue until the agency head certifies that (1) all relevant evidence has been referred to law enforcement, (2) responsible staff have been identified and discharged as required, and (3) 3% of the fraudulently obtained money has been recovered and deposited in the general fund.
- Reporting of reductions: the commissioner must promptly report each reduction to the specified legislative committees.
Forecasting and Data Reporting
- Forecast changes: the forecast must be updated to address fraud in state programs.
- New focus on fraud in forecasts: the forecast must include an estimate and discussion of fraud’s impact on the state budget and summarize actions taken since the last forecast to detect and prevent fraud in programs funded or administered by the state.
Repeals and Sunset
- Repeal of prior authority: repeals Minnesota Statutes 2025 Supplement section 15.013 subdivision 6 (Programs payments withheld for fraud), which previously allowed withholdings in certain situations.
- Sunset note: the repealed provision had a sunset, indicating it would expire (which this act eliminates by repeal).
Summary of What Changes This Bill Seeks
- Creates a formal process to respond to fraud in state programs with mandatory corrective actions, enrollment pauses, and staff discipline.
- Ties fraud findings to automatic, staged budget reductions and salary cuts for affected agencies and leaders, with a clear recovery target and reporting duties.
- Integrates fraud considerations into budget forecasts and long-range planning.
- Replaces an older, sunsetted provision with a new framework under the Fraud Isnt Free Act.
Relevant Terms - Fraud - Fraud Isnt Free Act - Corrective action plan - Enrollment suspension - Staff dismissal - Law enforcement notification - Program - Unexpended allotments - Agency administration - Agency head salary - Withholding/payments withheld - General fund - Forecast/forecasting - Fraud in state programs - Legislative Audit Commission - 16A.103 - 15.013 subdivision 6 (repealed) - 43A.33 (discharge procedures) - 15A.082 (salary provisions) - 16B.01 subdivision 2 (agency definition)
Bill text versions
- Introduction PDF PDF file
Past committee meetings
- State Government Finance and Policy on: March 03, 2026 08:15
Actions
| Date | Chamber | Where | Type | Name | Committee Name |
|---|---|---|---|---|---|
| February 17, 2026 | House | Action | Introduction and first reading, referred to | State Government Finance and Policy | |
| February 19, 2026 | House | Action | Authors added | ||
| March 05, 2026 | House | Action | Author added | ||
| March 09, 2026 | House | Action | Author added | ||
| March 12, 2026 | House | Action | Author added |
Citations
[
{
"analysis": {
"added": [
"New forecast parameter requirement: account for fraud in state programs; forecast language references subdivision 1k for fraud considerations."
],
"removed": [],
"summary": "Adds Subdivision 1a to 16A.103 establishing forecast parameters and tying forecast considerations to fraud in state programs.",
"modified": [
"Forecast framework updated to integrate fraud considerations into budgeting and forecasting."
]
},
"citation": "16A.103",
"subdivision": "1a"
},
{
"analysis": {
"added": [
"Subd.1k requires estimating fraud impact on the budget and reporting actions taken since the last forecast to detect and prevent fraud."
],
"removed": [],
"summary": "Adds Subdivision 1k (Fraud in state programs) to 16A.103, requiring the forecast to include the impact of fraud and summarize actions taken to detect and prevent fraud.",
"modified": []
},
"citation": "16A.103",
"subdivision": "1k"
},
{
"analysis": {
"added": [],
"removed": [
"Subdivision 6 of 15.013 repealed."
],
"summary": "Minnesota Statutes 15.013 is amended by repealing Subdivision 6 as part of the fraud-related reforms.",
"modified": []
},
"citation": "15.013",
"subdivision": ""
},
{
"analysis": {
"added": [
"Subdivision 5 detailing corrective action plan elements and related actions (e.g., staff dismissal, staff training, and steps toward fraud detection)."
],
"removed": [],
"summary": "Adds Subdivision 5 to 15.0135 governing corrective action plans and staff discipline in fraud contexts.",
"modified": []
},
"citation": "15.0135",
"subdivision": "5"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Referenced in the fraud provisions as a baseline for withholdings or actions related to fraud in programs funded by the state.",
"modified": []
},
"citation": "256B.04",
"subdivision": ""
},
{
"analysis": {
"added": [
"Theft under 609.52 included in the definition of fraud."
],
"removed": [],
"summary": "Fraud definitions reference theft under 609.52 as an example of fraud-related conduct.",
"modified": []
},
"citation": "609.52",
"subdivision": ""
},
{
"analysis": {
"added": [
"Perjury under 609.48 included in the definition of fraud."
],
"removed": [],
"summary": "Fraud definitions reference perjury under 609.48 as an example of fraud-related conduct.",
"modified": []
},
"citation": "609.48",
"subdivision": ""
},
{
"analysis": {
"added": [
"Forgery under 609.625 included in the definition of fraud."
],
"removed": [],
"summary": "Fraud definitions reference forgery under 609.625 as an example of fraud-related conduct.",
"modified": []
},
"citation": "609.625",
"subdivision": ""
},
{
"analysis": {
"added": [
"Forgery under 609.63 included in the definition of fraud."
],
"removed": [],
"summary": "Fraud definitions reference forgery under 609.63 as an example of fraud-related conduct.",
"modified": []
},
"citation": "609.63",
"subdivision": ""
},
{
"analysis": {
"added": [
"Subd.3 outlining discharge procedures and the five-year prohibition on state employment for those discharged under this provision."
],
"removed": [],
"summary": "Discharge procedures for employees who abet fraud; includes a five-year state employment prohibition.",
"modified": []
},
"citation": "43A.33",
"subdivision": "3"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Defines a law enforcement agency for purposes of fraud investigations and reporting.",
"modified": []
},
"citation": "16B.01",
"subdivision": "2"
},
{
"analysis": {
"added": [
"Ten percent reduction in unexpended allocations for the agency's administration; 25 percent reduction in agency head salary."
],
"removed": [],
"summary": "Budget reductions due to fraud; requires reductions in unexpended allocations and agency head salary, with broader statutory deferrals.",
"modified": [
"Establishes and governs procedural steps for confirming reductions and continuing reductions until specific conditions are met (e.g., referral of evidence, staff actions, evidence recovery)."
]
},
"citation": "16A.093",
"subdivision": "1"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "References 15A.082 in relation to agency head salary reductions and related budget adjustments.",
"modified": []
},
"citation": "15A.082",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Fraud-related data and investigations are treated as criminal investigative data under Minnesota Statutes Chapter 13.",
"modified": []
},
"citation": "13",
"subdivision": ""
}
]Progress through the legislative process
In Committee