USDA freezes $129 million in Minnesota grants over fraud and lack of oversight

By SUZANNE DOWNING

The US Department of Agriculture has suspended all active and future federal grants to the State of Minnesota and the City of Minneapolis, citing what it called widespread and systemic fraud and a refusal by state and city officials to cooperate with federal oversight.

USDA Secretary Brooke Rollins announced the action Friday evening, releasing a formal letter sent to Minnesota Gov. Tim Walz and Minneapolis Mayor Jacob Frey that halts more than $129 million in federal funding effective immediately.

The freeze covers every USDA award currently flowing to the state and the city, along with any future grants, unless Minnesota provides detailed financial documentation proving how federal money has been spent.

Rollins said her department is requiring the state and Minneapolis to submit payment justifications for all USDA-funded expenditures going back to January 20, 2025, within 30 days. Going forward, every transaction tied to USDA grants will also require advance justification. If the documents are not provided, the funding suspension will remain in place.

The action follows years of high-profile fraud cases involving federal programs administered by Minnesota agencies and nonprofits. The most significant was the Feeding Our Future case, a Minneapolis-based nonprofit that federal prosecutors say defrauded taxpayers of nearly $250 million through pandemic-era child nutrition programs funded by USDA and administered by the Minnesota Department of Education.

As of late November, 78 people had been charged in what the Department of Justice described as the largest Covid-19 fraud scheme in the country.

In her letter, Rollins cited that case along with other alleged fraud tied to the Small Business Administration’s Paycheck Protection Program, Minnesota’s Housing Stabilization Services program, and state-licensed daycare centers.

The USDA also pointed to ongoing concerns about the Supplemental Nutrition Assistance Program, known as SNAP. According to the letter, Minnesota officials have resisted federal efforts to verify the accuracy of SNAP enrollment, even asking a court to block a USDA directive requiring the state to recertify its recipient rolls. Federal officials say state agencies have also provided incorrect information about SNAP participation to the federal government.

Rollins said Minnesota officials have rejected increased oversight, at times characterizing criticism of fraud as politically or racially motivated rather than addressing the financial irregularities themselves.

The Trump administration’s decision effectively puts Minnesota on financial probation with one of its largest federal funding sources. Until federal officials are satisfied that the state and the City of Minneapolis can document where money is going and who is receiving it, no USDA dollars will be released.

The funding freeze adds pressure to a state government already under scrutiny from federal prosecutors and auditors, as investigations into pandemic-era and social-service spending continue to expand.