Minnesota’s Economic News – W/E 4/16/21
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Fox News, which broke the story of wide-spread fraud and criminal activity here and overseas in connection with CCAP (Child Care Assistance Program) last May, reported yesterday that the Inspector General in charge of fraud prevention for CCAP, Carolyn Ham, remains on paid leave at $125,426 a year. She was placed on leave by Gov. Walz over two months ago following an Office of Legislative Auditor’s (OLA) report on the CCAP program that included substantiation for 2018 allegations that welfare funds are likely funding the terrorist organization El Shabbab in Somalia. Minnesota is home to the largest number of Somali refugees and immigrants in the country; all welfare programs available to citizens are open to refugees and other immigrants.
CCAP, which spent about $283 million in federal and state funds in 2018, is supposed to help low-income mothers pay for child care while they seek employment or education. Despite the allegations of fraud and incompetence at DHS, Fox News reported:
Meanwhile, when Gov. Tim Walz signs the state budget into law starting Thursday, Ham’s former unit will get new funding and responsibilities to root out fraud.
The health and human services funding bill passed by state lawmakers Saturday provides $5 million to buy a tracking system while hiring new analysts, investigators and inspectors. About $1.3 million of that will be funneled into Ham’s former unit, DHS’s Office of Inspector General.
The state’s nonpartisan legislative auditor had recommended separating the investigative unit from DHS, the agency whose programs it oversees. Lawmakers declined to do so.
While there is a federal block grant, here is the state’s portion of the CCAP program funding actual and projected:
Former Senator Tony Lourey is the new head of DHS under Gov. Walz; DHS Deputy Commissioner Chuck Johnson was put in charge of the CCAP fraud prevention after Ham was put on leave. Both officials promised senators during hearings that they would vigorously investigate the fraud and fix the internal problems that lead to as much as $100 million a year or more being used illicitly (see OLA report Appendix B). The CCAP program in 2018 spent about $283 million in direct subsidy payments to child care providers, with most of the funds going to large child care centers, some of which were set up just for CCAP families. All of the fraud that has been prosecuted to date involved Somali immigrants as providers and recipients (see OLA report Appendix A).
Governor Tim Walz has not announced any plan with regard to Carolyn Ham or a plan to aggressively prosecute welfare fraud; instead he supported changes to internal procedures and increased funding for the program.
During the session, the legislature was split along partisan lines on how to deal with the CCAP fraud. Both the House and the Senate supported adding a variety of measures to address the fraud but the House DFL leadership demanded more program funds, citing a waiting list of families, and the need to fund fraud prevention. The Senate leadership threatened to de-fund the program but in the end Majority Leader Gazelka agreed to an increase. Welfare spending is the fastest growing part of Minnesota’s state budget. How much of it is consumed by fraud is unknown; when I met with Inspector General Ham and DHS Commissioner Emily Piper in 2018, they told me the fraud rate was between 7-10 percent.
Given the seriousness of the allegations, especially the concerns expressed by federal investigators that welfare funds are supporting terror abroad, and the finding by the OLA that DHS did not have basic internal controls in place and ignored the warnings of its own investigators, the Center has called for the Trump administration to suspend funding for CCAP until Minnesota can demonstrate competence in administering the program (that review process, which is not underway to the best of the Center’s knowledge, could take years). Allegations of fraud do not stop with CCAP. The Personal Care Attendant or PCA program is now under audit by the OLA.
To conclude, we must note that welfare fraud is nothing new in Minnesota; it began long before the state became the number one destination for refugees in the country. But Minnesota is the number one destination because we have a generous and poorly run welfare system. It is time for the state to protect the integrity of taxpayer dollars through a massive overhaul of DHS. But if the Governor will not even summarily fire Carolyn Ham following the devastating OLA report, it is unlikely that the current leadership is poised to begin the kind of overhaul needed to stop fraud and abuse.