State Grant Reform - Minnesota Council of Nonprofits

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When nonprofits partner with state government through grants and contracts, it creates a powerful dynamic that benefits communities across the state.

These collaborations leverage the strengths of both sectors: nonprofits bring deep community connections, specialized knowledge, and flexibility, while state governments offer resources and broader reach. Together, they can address complex social issues more effectively than either could alone.

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Grant reform challenges | Nonprofit representation in reform efforts | Proposed legislation to prevent fraud | Timeline | Related resources

By aligning their goals, they ensure that public funds are used efficiently to meet local needs, fostering innovation and ensuring that services reach those who need them most. This partnership also promotes accountability and transparency, as both entities work together to track outcomes and measure impact, ultimately leading to stronger, more resilient communities.

The ways in which the state oversees its contracts with nonprofits continues to be a topic at the Legislature. The nonprofit community welcomes appropriate oversight, as having the trust of our communities is essential to meeting our missions. MCN is working on behalf of the sector to ensure any new or changed state regulations are developed with input from nonprofits and consideration of how nonprofits will be impacted. Nonprofits must be included in implementing any and all reform efforts.

Creating better grant processes is difficult, due in part to these factors:

The State of Minnesota’s grantmaking system is decentralized – grants and contracts are done through over two dozen state agencies, each with many of its own rules and processes.
The state does have a centralized Office of Grants Management (OGM), which has policies related to grantmaking that agencies should follow, but OGM does not have authority to require that its policies be followed.
Each year the state partners with hundreds of entities, and its grants and contracts with nonprofits generally total over $500 million. The contracts cover services for workforce training, health care for people experiencing homelessness, renovation of community infrastructure, and many, many more topics. Creating one set of rules that works for all these types of contracts doesn’t always make sense.

Ensuring nonprofits are represented in reform efforts

MCN is co-leading a coalition advocating for reforms to the state’s grantmaking & contracting policies and procedures, in a variety of ways that center the interests of all Minnesota nonprofits.

About the Advocacy Coalition

MCN convened a State Grants Working Group in 2023 to work toward equitable state grantmaking by focusing on the experiences and expertise of rural, small, and BIPOC-led and -serving nonprofits.

About the Working Group

Trends of proposed legislation to prevent fraudulent use of state funds

Since 2022, when the FBI announced a massive fraud investigation into the nonprofit Feeding Our Future, we have seen proposed legislation each session that would impose burdensome and unnecessary restrictions from the state onto nonprofits in attempts to prevent fraudulent use of state dollars. Some of these proposed changes have included increased application and reporting requirements for grants, restrictions on who can serve on nonprofit boards of directors, a salary cap on nonprofit executives’ salaries, and more.

MCN is in full agreement that state funds must be used for their intended purpose, as nonprofits rely on public trust to carry out their charitable missions.

Nonprofits are a crucial part of state infrastructure and must be consulted on any new regulations to ensure proposals do not have unintended consequences regarding critical services for people and communities most in need.

Nonprofits embrace appropriate oversight as a vital part of our commitment to transparency and accountability. Appropriate oversight ensures the public can trust in our work, knowing resources, including state dollars, are being used responsibly to strengthen communities and address critical needs.

We will continue to work with state legislators and other decision makers to craft legislation that ensures the best use of state funds, without creating excessive administrative burdens for the partners who help to carry out the state’s priorities through grants and contracts.

Minnesota State Grant Reform Timeline of Events*

January 2025: MCN holds a webinar on state reform proposals to keep nonprofits aware of the latest regarding reform efforts (webinar slides coming soon).
January 2025: Legislative session begins and bills* are introduced intended to ensure appropriate use of state funds. MCN shares concerns with legislators about excessive administrative burdens. (*On January 24, 2025, the Minnesota Supreme Court held that 68 members are necessary to constitute a quorum of the House. Since this ruling, new bill numbers have not been released.)
Early 2024: MCN created a coalition of nonprofits interested in reforms to state grantmaking
Late 2023 and 2024: The Office of Grants Management hires staff, significantly increasing the capacity of the office.
July / September / October 2023: MCN convened The State Grants Working Group to aspire to equitable state grantmaking for all. The working group was made up of 35 members, including 15 staff engaged in disbursement of state grant funds, two legislators, and 20 nonprofit leaders from across the state. The State Grants Working Group met three times with goals to strengthen relationships across sectors; surface issues and opportunities regarding state grantmaking processes and policies; and ensure the experiences and priorities of nonprofits are influencing state-led reform efforts. Read more about the working group, including its insights and summary here.
May 2023: The Legislature included in its final budget a very significant increase in the state’s internal capacity for grants management by investing in staff for the Office of Grants Management and funding for a feasibility of a grants management platform that all state granting agencies would use. MCN strongly supported these initiatives, which were originally proposed in the Governor’s budget proposal.
May 2023: The Minnesota Legislature increased financial oversight on grants and contracts with nonprofits. MCN worked with legislators to make the new law as simple as possible, and was successful in our advocacy to include an exception for grants under $50,000, among other changes.
April 2023: The Minnesota Senate Finance committee and Minnesota House Ways & Means committee added an amendment to omnibus bills regarding financial review of grants to nonprofits.
February 2023: The Office of the Legislative Auditor releases their report, Oversight of State-Funded Grants to Nonprofit Organizations, showing that grants management staff at granting state agencies do not have the tools necessary to conduct appropriate oversight.
January 2023: Gov. Walz releases his two-year budget proposal that includes some of MCN’s top advocacy items related to equity in state grantmaking (improving grant administration & outreach; increased technical assistance; standardizing & streamlining processes; and investment in nonprofit capital infrastructure).
January 2023: The Minnesota Department of Management and Budget releases their report, Learnings from Enterprise-wide Review for Grant Impact, highlighting cumbersome state application and reporting processes.
December 2022: Gov. Walz proposed plan to fight fraud in the wake of Feeding Our Future scandal, including adding an inspector general to the Minnesota Department of Education and investing more in grant oversight, audits, and fraud investigation (see more details in the plan detailed above in January 2023).
December 2022: MCN publishes research on Increasing Effectiveness, Transparency, and Accountability in State Grants to Minnesota Nonprofits
June 2022: MCN and nonprofits successfully advocate against unnecessary and duplicative oversight proposals
May 2021: MCN published research in partnership with graduate students at the University of Minnesota’s Humphrey School of Public Affairs on Equity in Minnesota State Grantmaking
November 2019: A group of leaders in Minnesota’s urban American Indian community sent a letter to Governor Walz and his commissioners calling attention to the inequities in the state’s grantmaking decisions and resource distribution.
2008: The Office of Grants Management created policies that cover rating criteria for competitive grant review, publicizing RFPs, grant payments, and much more.
March 2008: MCN and the state Office of Grants Management released findings from three focus groups that were convened to gather recommendations from state grantees to incorporate into OGM’s work.
2007: The state creates an Office of Grants Management within the Department of Administration.
2007: The Office of the Legislative Auditor releases a report on State Grants to Nonprofit Organizations, which recommends, among other things, creation of a centralized grants management office.

*We acknowledge there have been countless community efforts to improve state grantmaking systems over the years, and this is in no way intended to be a comprehensive list but rather a snapshot of current events and some historical context.