DEED defends Promise Act grant process; 76 applications flagged, referrals made to BCA

The Minnesota Department of Employment and Economic Development (DEED) presented its Promise Act grants report, describing how legislatively‑named intermediaries distributed grants to very small businesses under the program and how DEED is conducting oversight to prevent improper payments.

Commissioner Matt Bear like (recorded as introduced) said the grants portion of the program was about $103 million in total on the presentation slides (which combined awards, administrative costs and technical assistance). He told the committee that intermediaries receive applications directly, perform initial eligibility reviews and that DEED performs a 10% spot check of determinations before funds are released; DEED also plans 12‑month post‑award audits of recipients' documented uses of funds. "We have numerous measures to preserve the integrity of the program," the commissioner said.

DEED reported that partners identified 76 applications in round one with documentation concerns or possible fraud indicators. Commissioner Matt Bear like said those flagged applications did not receive payments and that DEED referred the cases to the Bureau of Criminal Apprehension (BCA) for investigation. When asked how many referrals were made, DEED said it had referred the flagged matters to the BCA and that prosecution decisions are made by law enforcement. The department also said it seeks to recoup improper payments from the nonprofit intermediary when possible; the agency estimated recoveries to date are modest (on the order of $10,000 reported at the hearing).

Members raised a series of data and integrity questions. Representative Zeleznikar asked why 322 of the transportation and warehousing awards were concentrated in the seven‑county Twin Cities area; DEED acknowledged the distribution and said it would investigate whether awards in that NAICS class included non‑emergency medical transportation and whether there was overlap with other state audits (for example, an Optum review cited by members that had identified Medicaid billing problems in some providers). DEED said it would follow up and that some applicants operate in multiple locations, which can affect eligibility determinations.

On fraud‑prevention tools, DEED said it plans to deploy additional identity and document verification technology (Thomson Reuters Clear and tools used by intermediaries such as Plaid) and can increase front‑end checks if additional administrative resources are provided. Deputy Commissioner Kevin McKenna described the technology as providing deeper identity verification than current tools.

Several legislators asked whether DEED should pause disbursements while investigations continue; DEED said it did not recommend pausing the program because the department has tools to stop improper awards before payment and to claw back funds if later determined to be improper. DEED reiterated that most flagged cases have ultimately been validated as proper after additional review but acknowledged more work is needed to strengthen processes.

The committee asked DEED to provide additional data and to continue to coordinate with law enforcement and intermediaries as investigations proceed. The presentation closed with committee members pressing for continued transparency and timely updates.