Minnesota Auditor: DHS Staff Backdated and Created Records After the Audit of $425 Million in Grants Began

Minnesota’s nonpartisan Office of the Legislative Auditor found that staff at the state Department of Human Services backdated or created grant documents after auditors started asking for them. The finding came in a January 2026 performance audit of DHS’s Behavioral Health Administration, which handed out more than $425 million in mental health and substance use grants under Gov. Tim Walz’s administration and, the auditor concluded, “did not comply with most requirements we tested.”

The audit was presented to the Legislative Audit Commission on January 6, 2026, more than eight months before this article. Its findings have not gotten better with age.

“Backdated or created after our audit began”

The most serious problem is spelled out in Legislative Auditor Judy Randall’s cover letter to DHS Temporary Commissioner Shireen Gandhi. During the audit, Randall wrote, “we identified a number of documents that BHA either backdated or created after our audit began.” Because of that, the auditors said, “we could not fully rely on this documentation.”

In testimony to lawmakers, Randall described it as a systemic effort, something KSTP reported she had never seen in nearly three decades at the office. “It wasn’t just one individual that created the documents or backdated the documents,” she said. “There were several BHA staff that we could identify who had done this and it was across the grant oversight process.”

The report gives a concrete example. For three monitoring visits to one grantee that supposedly happened in May 2024, October 2024 and January 2025, BHA produced documentation that the grant manager created in February 2025, after the audit had started. The manager said the visits happened on time but were never written up, and could not provide any notes, emails or calendar entries to show they took place.

Elsewhere, auditors found that BHA completed 26 grantee performance evaluations only after auditors requested documentation, and that in one case a grant manager performed a required financial reconciliation 221 days after the final payment, again after the audit started.

Where the money went, and what nobody checked

During the audit period, July 1, 2022, through December 31, 2024, BHA managed 830 unique grant agreements, including 590 with nongovernmental organizations. Annual grant spending ran almost $182 million in fiscal 2023, $191 million in fiscal 2024 and $53 million in the first half of fiscal 2025. The auditor issued 13 findings. Among them:

• Progress reports: Of 51 grant agreements that should have produced at least one progress report, auditors found problems with 29. Seven agreements contained no reporting requirement at all, and those seven grantees received $2.1 million. BHA paid $11.2 million to eight grantees with past-due reports.
• Monitoring visits: BHA could not show that it conducted 27 of 67 required monitoring visits. For 24 visits to 11 grantees, it could provide no documentation whatsoever, blaming staff turnover.
• Financial reconciliations: Auditors found issues with 63 of 71 reconciliations they reviewed.
• Performance evaluations: BHA could not demonstrate or did not complete evaluations for 58 of 70 grant agreements tested.
• Overpayments: BHA overpaid two grantees and paid some for work performed before their grant agreements were fully executed.

The $672,647.78 month

One case stands out. Auditors visited a grantee that could not provide “detailed invoices or program participant data to support a payment of $672,647.78 from BHA for a single month of work.” It was the first payment under a $1.6 million agreement. The grantee had passed the money to 14 subcontractors; auditors visited two, and neither could document whom they served. One subcontractor said the grantee told it that it did not need to keep detailed participant records such as sign-up sheets.

Then the kicker. According to the report, the BHA grant manager who approved that payment left DHS a few days later and then began consulting for the grantee. When auditors asked BHA management whether anyone had questioned such a large bill for one month of work, management said it could not answer, citing limited information in its system and the departed manager.

What DHS and lawmakers said

Gandhi told lawmakers DHS was investigating. “If somebody directed staff to falsify documents, it is absolutely wrong, not OK,” she said, according to KSTP. “It’s an HR matter for sure, it may be more than that.” She also said, “It is absolutely unacceptable that any staff would provide anything other than accurate representation of the work done to an auditor.” DHS did not say how many employees were under investigation or whether anyone had been disciplined.

House Speaker Lisa Demuth called the findings shocking. State Sen. Mark Koran, a Republican member of the Audit Commission, said the report showed “a complete breakdown in how DHS’s Behavioral Health Administration manages hundreds of millions in taxpayer-funded grants,” adding, “Fabricating evidence after an audit begins is unacceptable.” Former U.S. Attorney Erica MacDonald told KSTP that “Anytime that you have a government actor making a false material statement in the course of an audit, that is an issue.”

Many of these were not new problems. The auditor flagged several findings, including the missing progress reports and monitoring visits, as prior audit findings that had never been resolved. DHS, in its formal response, agreed with the recommendations and pointed to mandatory staff training and closer supervisory review.

Minnesota taxpayers have heard “we’re fixing it” before. What is new here is that when the state’s own watchdog came looking for the paper trail, staff did not just fail to produce it. Some of them produced paper that was not there before.

They didn’t lose the paper trail on $425 million; when the auditor knocked, they started writing a new one.

Editor’s note: This article covers a January 2026 audit by Minnesota’s Office of the Legislative Auditor that drew renewed attention in September 2026.

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