More oversight of MN nonprofits urged

01/06/2007

The state should create an office that would oversee consistent policies for its grants to nonprofits, the legislative auditor said.


By Robert Franklin,
Star Tribune
Last update: January 05, 2007 – 8:46 PM


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State government gives out hundreds of millions of dollars to nonprofits each year in a process that is inconsistent, fragmented and lacks adequate accountability, Minnesota's legislative auditor reported Friday.

Some grants were administered without competitive proposals, site visits, financial oversight, conflict-of-interest reviews or even contracts, said the report, authored by Legislative Auditor Jim Nobles.

The report recommended creation of a Grants Management Office in state government, a set of "best practices" that agencies would have to follow and an end to legislation that awards money to groups without competition.

The auditor looked at a sampling of 50 grants to nonprofits that help with such services as job training, physical and mental health education, business startups, battered-women's shelters, day care, food shelves, adoption, rural issues, early childhood education and wildlife habitat.

Under the current system, "how do you know if there's no fraud, or whatever?" asked Sen. Ann Rest, DFL-New Hope, chairwoman of the Legislative Audit Commission.

"You made the point for me," said Judy Randall, who presented details of the report to the commission Friday. "You're right on the money."

The report found problems in a sampling of $300 million in grants made directly by state agencies last year. It is likely that there were problems in another $700 million funneled through counties without adequate oversight, Randall said.

And there could be problems in an additional $3.7 billion paid directly for hospitals, health plans and other medical-related programs, she said.

With billions of dollars at stake over several years, said Sen. James Metzen, DFL-South St. Paul, a commission member, "this is awfully scary to me, and I think we ought to develop some oversight."

Representatives of Gov. Tim Pawlenty's administration, the Minnesota Council of Nonprofits and the Audit Commission agreed.

"This is really a critical issue," said Mary Ellison, deputy commissioner of public safety and a team leader in Pawlenty's "Drive to Excellence" efficiency and modernization project. The administration supported creation of a Grants Management Office during the previous legislative session, Ellison told the commission. "We need to have high levels of accountability."

Executive Director Jon Pratt said the Council of Nonprofits supports the recommendations, which would make the process "clearer, less confusing for nonprofits as well."

Rest promised that "there will be interest from the Legislature" in the proposals.

Randall said auditors did not follow grant money to see if there was fraud or misuse, but in recent years has found problems among nonprofits in several investigations. Friday's report dealt only with how the money was distributed.

Legislators directed grants

The audit staff disclosed these other findings Friday:

• Legislation sometimes specified which nonprofits would get grant money, instead of having any kind of competitive process. Randall acknowledged that there has been better oversight in one area -- from the Legislative Commission on Minnesota Resources.

•The $1.05 billion funneled through state agencies and counties last year went to about 1,900 nonprofits for a wide variety of services ranging from job training to wetland protection.

• Ten state agencies accounted for more than 95 percent of state funds paid to nonprofits last year, with two-thirds paid out by the Department of Human Services.

Pratt added that, before this report, "the state didn't even know the scale or scope of its relationships with nonprofits." With leveraging volunteers, he said, "this is one of their best bargains in providing services."