Why everyone around state government is talking about OLA: the small office that looks for fraud, missteps … and gets headlines

During the second of two bombshell hearings before the Minnesota Legislative Audit Commission last week, Judy Randall offered a theory about how some state agencies miss clear signs of fraud by recipients of tax dollars.

The head of the Office of the Legislative Auditor jokingly termed her comments: “Some deep thoughts by Judy Randall.”

In one week, her Office of the Legislative Auditor (OLA) had found errors in a $500 million program meant to reward pandemic frontline workers with thank you checks and exposed multiple failures by the Minnesota Department of Education to catch a $250 million fraud in a feeding program for low-income children. What, she said, could possibly tie them together? What common theme is there when state agencies miss clear gaps in regulation, clear signs of fraud?

Her answer both posed an interesting theory and defined her agency.

“State agencies don’t necessarily approach their work with an oversight and a regulatory mindset,” Randall told the bipartisan commission after presenting the investigation into the Feeding Our Future scandal Thursday. Agencies often speak of working “with” beneficiaries of programs because they have a passion for the benefits that often result. The education department referred to the organizations that received child feeding money as “clients” and “patrons” rather than applicants or grantees. 

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“Not that that’s wrong, but you can’t just trust everybody,” Randall said of the message the terminology sends. “I wish we could but clearly we can’t.

“We haven’t seen evidence of the skill set that is needed, of not trusting people,” she said. “If they do have that skill set, we want them at OLA because we’re skeptical.”

The Office of the Legislative Auditor is, in fact, a team of skeptics, professional nit-pickers. And because they are sworn to be free of conflicts of interest in a highly partisan setting, they are political agnostics so as to ward off accusations of bias. The employees — from division bosses to support staffers — must fill out conflict of interest statements annually and when assigned to a specific review audit team — must declare any financial or political involvement for themselves, their spouses as well as close friends. 

Randall, for example, says they can and should vote in elections but she doesn’t take part in the every-four-year presidential primary that requires a declaration of party preference.

“It is an extremely professional office and we take the work incredibly seriously,” Randall said. She said the staff is “neurotic” about accuracy and guards its nonpartisanship and independence “jealously.”

“When we release reports, especially like the ones we released this week, they come under a lot of scrutiny. We do everything we can — both individually and as an organization — to make sure that they are accurate, objective and useful,” Randall said in an interview with MinnPost on Friday. In the job interview process, applicants are told they have to give up partisan political involvement and cannot have any connections to the agencies they oversee.

“Look, if we give anybody any opening to question our independence, it takes out all that work, not just that you’ve done but that the team has done,” she said. “People respect their peers too much to jeopardize that.” 

Beyond ‘Gotcha’

Taxpayers of Minnesota might not know much about the office that Randall leads, though they might be more familiar with it this week after the back-to-back audit reports that exposed a lot of waste, a fair amount of fraud and a smattering of abuse. The relatively small agency — about 65 employees — is charged with responding to requests for investigations from both the Legislature and the public.

Each year it completes a dozen or fewer investigations as directed by the audit commission. It also responds to legislation for special audits such as the series of looks into the Met Council’s stewardship of the Southwest Light Rail Transit project. Randall, perhaps in an earlier episode of “Deep thoughts by Judy Randall,” said of the Met Council’s management of future light rail projects: “Based on what we’ve seen and based on the structure that we have for funding and building, I’m not convinced that Met Council is the right entity to be the responsible authority for those projects.”

Randall also singled out the Met Council for what she considered a lack of cooperation. She told the audit commission last year that she considered using a power rarely employed — subpoenas. OLA’s audits of SWLRT did lead to some changes this past session in how future projects are managed. 

State law gives the OLA significant standing in government. It requires state employees who are aware of fraud or possible fraud to notify the OLA — something that didn’t occur during the Feeding Our Future scandal. It also requires agencies to cooperate with investigations.

“When an agency finds out that we are coming calling, they’re not psyched,” Randall said. “They’re clearly not happy about it. Most agencies understand it is our role, it is part of being a government agency. Most people in government understand there needs to be transparency.

“We’re not here to do a ‘gotcha.’ We’re trying to make sure government is working as well as it can,” she said. Which is why state agencies that are subject to critical audits are in a tough spot. Any questioning of the results looks like they are being defensive. When it responded to the hero checks audit with an eight-page letter, commission Chair Rick Hansen noted it was the longest he’d seen. Education Commissioner Willie Jett was criticized by commissioners for his responses to the Feeding Our Future recommendation.

Rep. Emma Greenman, DFL-Minneapolis, is on her first term on the commission. She also chairs the committee that culls the list of requested audits down to single digits. Greenman said she became interested in OLA from her work on combating what is termed misclassification of workers when some employers call staff contract workers rather than employees. That classification denies those workers of legal protections such as wage and hour law and injured worker protections as well as benefits such as sick leave. Her research pointed her to an examination of the issue by OLA and she urged it to do an update this year.

Her support for the work, however, doesn’t mean she thinks it is above questioning, and she took issue with both the methods and the results of the hero checks audit. For Greenman, the bugs that OLA found were known risks by the legislators such as herself that crafted the program. Lawmakers wanted checks out quickly to those who worked in virus-exposed jobs during the pandemic and allowed them to self-report that they had to work in person and performed at least 120 hours of such work was the chosen method.

Specifically, lawmakers rejected a proposal to give employers the role of telling the state that a given worker was eligible. Therefore, for OLA to use a survey of employers to do a retroactive assessment — surveys that many employers ignored — wasn’t a fair method.

“We questioned whether employers would be forthright about that question,” Greenman said. “My biggest issue with the report is they used methods we expressly rejected. The audit was making a policy decision, and that’s not their job

“We questioned whether employers would be forthright about that question,” Greenman said. “My biggest issue with the report is they used methods we expressly rejected. The audit was making a policy decision, and that’s not their job — it’s our job.”

Greenman also said she thought OLA was dismissive of the fraud prevention work of the Department of Labor and Industries that prevented most fraudulent applications.

“The actual fraud number they found was like 2%,” Greenman said. “We’d like it to be zero but if you talk to people in the private sector, they’d think that was a good number. And the reason it was a good number is because all of the checks that were in place that OLA didn’t talk about.”

While Greenman agrees that agencies that say the auditors don’t understand their agency or their methods is a bad response, she thinks it is fair for agencies and legislators to ask tough questions about the reports.

“That’s our job,” she said of legislators. “A lot of times it is the auditor and the executive branch but the Legislature passes laws and we have a stake in making sure they are executed. Not to just cede our authority to the legislative auditor.”

Randall, who had been head of the program evaluation division, was named legislative auditor in 2021, replacing James Nobles who had held the position for 38 years. She was hired by the 12-member audit commission which is made up of six DFLers and six Republicans, six of them House members and six of them Senators. Her term is for six years and, as Nobles demonstrated, she can receive additional terms should the commission choose.

But she can be removed prior to the end of each term only for cause and only after a public hearing of the commission.

Randall is an Ann Arbor, Michigan, native who has worked for OLA for 26 years. She received masters’ degrees in economics and education policy at Wisconsin. After a stop in Michigan where she worked for a nonprofit, she and her husband moved to Minnesota.

“I like to say I grew up professionally at OLA,” she said. 

The office was created in 1973 at the recommendation of a private-sector work group called the Loaned Executive Action Program. It replaced an office called the Public Examiner who was appointed by the governor. According to the OLA’s history page, the task force argued that a governor-appointed examiner lacked the “arms-length” separation between the auditor and the audited.

Its duties and resources grew over time but it still turns down far more requests for audits than it can conduct. In the last round of screenings, a list of 100 requests from legislators and private citizens was culled to just five. And even the sweeping examination of the $250 million Feeding Our Future fraud did not look into other nonprofits that received money from the two federally funded youth feeding programs.

The elected state auditor — currently Julie Blaha — was given the duty of conducting “best practice reviews for local governments.” She also conducts financial audits of many local governments.

Still, the OLA has been responsible for a series of blockbuster audits over the decades. It exposed mispayments and fraud in the Child Care Assistance Program in 2019, found law violations and abusive behavior in the Metro Gang Strike Force in 2009, reported on the reasons for a rough rollout of the MNSure health insurance plan and found concerning behavior in University of Minnesota drug trials in 2015 after the suicide of Doug Markingson, a patient enrolled in research.

Randall said an audit she worked on that had a big impact was one on the Office of Health Facility Complaints in the Department of Health. Then-Health Commissioner Jan Malcolm used the report to examine the program, and the Legislature acted to reform how complaints about substandard health facilities are responded to.

“That’s how it should work,” Randall said. “We proposed changes to both the Legislature and the executive branch. The agency took it really seriously and put things into action and then worked with the Legislature to make change.”

Others involved teacher licensure, charter schools and the money sent to school districts that have higher than average enrollment of students and color.

Sen. Mark Koran, a North Branch Republican who has been on the audit commission for the entire eight years of his legislative service and has served stints as both chair and vice chair, supports the OLA’s mission but thinks the state needs more oversight of spending and program compliance than the agency can provide. Some agencies have offices of inspector general, with the Minnesota Department of Education being the latest to create that internal watchdog role last September. But Koran said he considers them too close to the agencies they oversee.

“The description of the IG that they created for the Department of Education — law enforcement, investigative, subpoena — all of those things are legitimate,” Koran said. “The problem I have is it doesn’t work in the Department of Human Services. To mirror that in [the education department]is change without progress.”

Koran pointed to the 2019 OLA report on the Child Care Assistance Program that found dysfunction in the inspector general’s office itself.

In addition, Koran thinks the OLA needs more auditors and support staff given that the audit commission rejects far more requests for examinations than it authorizes. The feeding program that led to the Feeding Our Future fraud could have other problems but the audit released last week only looked at one recipient of funds.

“There were probably a dozen other channels OLA staff would love to pursue, and the taxpayers would benefit by, but they are challenged by resource restraints,” Koran said.

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An independent agency with investigative, law enforcement and prosecution authority is needed, if not within OLA then patterned after it, Koran said.

Randall said she thinks inspectors general can be useful, “but it does depend on whether they are given the tools they need and the independence they need.” Whether OLA should be a larger agency, Randall said “we have an endless amount of work to do.

“Could we grow? Sure. But I’m not trying to empire build,” she said. But she is wary of expanding the mission of the office into law enforcement and prosecution of fraud, as has been suggested.

“It’s not something OLA has had. It is not our expertise,” she said, though OLA does refer information to law enforcement as well as county and federal attorneys. Whether the state creates such an office that is modeled on OLA is a legislative question, Randall said.

Gov. Tim Walz on Monday answered questions about the dual audits for the first time. He demonstrated how delicate the balance is — praising the function of the OLA while tossing out a few excuses.

“We appreciate the work of the OLA and others during the time of COVID or anytime of trying to be as effective as we possibly can,” Walz said. He pointed to the creation of an inspector general at the Minnesota Department of Education as a response and even alluded to the fact that Jett replaced the commissioner cited in the audit, Heather Mueller, though he didn’t link the two.

“Were there things that individuals could have done on their own? Yeah, I think the answer is probably yes,” Walz said. “But that isn’t the sole reason.”

And Walz also noted the convictions this month in U.S. District Court of the first five defendants to face trial for the $250 million fraud. 

“We can always do better,” Walz said, while also citing the COVID-19 pandemic that was the setting for both audits. “There is always someone who is trying to commit fraud. The trick is trying to stay ahead of them. If we don’t, these kinds of things happen.

“I will accept responsibility,” he said. “We have to do better.”

Editor’s note: Peter Callaghan wrote this story for MinnPost.com. Callaghan covers state government for MinnPost.

This article first appeared on MinnPost and is republished here under a Creative Commons license.

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