State agencies could withhold program payments during fraud investigations

A state agency head may temporarily withhold payments from a program participant connected to a fraud investigation. This covers participants in any program run by that agency, including people and organizations receiving, distributing, or holding public funds or resources. The agency head must verify a credible allegation of fraud from sources such as complaints, audits, court filings, or investigations. The allegation must concern the participant and relate to a program run by the agency, or another agency must have made the required determination. Federal law may limit the withholding. The participant must receive notice within five days and may submit written evidence for review, but the temporary withholding is not appealable under chapter 14. Withholding must stop when the agency head finds insufficient evidence or related legal proceedings end, unless another law allows further action.

The commissioner of management and budget must report approved exceptions to statewide grant policies, and grant agreements must cover certain people with control over grant funds. The grant rules apply to executive agencies, covered state grant agreements, named noncompetitive legislative grant recipients, and key personnel or fiduciaries connected to grant recipients. A named, noncompetitive recipient may incur eligible expenses for up to 60 days before an accounting encumbrance if the agency agrees to a work plan and budget. A grant agreement must provide for immediate termination after a conviction related to a state grant agreement. The recipient definition includes individuals, entities, board members, officers, executives, employees, agents, and people with fiduciary responsibility or authority over grant funds. The permitted pre-encumbrance spending period lasts up to 60 days; approved policy exceptions expire or must be renewed after five years.

The commissioner must send an annual report on program-integrity work to the legislative committees overseeing children, youth, and families. The report covers the department's inspector general functions, including licensing, maltreatment investigations, child care assistance investigations, caseloads, site visits, and major fraud cases. The report must include five-year historical and descriptive data where specified. The report must include updates from the department's Office of Inspector General divisions. Reporting begins January 1, 2027, and continues annually.

The commissioner must send an annual report on program-integrity work to the legislative committees overseeing human services. The report covers background checks, licensing, maltreatment investigations, provider oversight, screening, medical assistance investigations, and major fraud cases. The report must include five-year historical and descriptive data where specified. The report must include updates from the department's inspector general divisions. Reporting begins November 30, 2026, and continues annually.