JUST IN: Tim Walz’s Scandal Deepens After Bombshell Audit Uncovers New Fraud

A blistering state audit in Minnesota found widespread failures, weak controls and troubling documentation issues inside the Department of Human Services’ Behavioral Health Administration, fueling fresh concerns over massive fraud across state government.

The nonpartisan Office of the Legislative Auditor said in a report released Monday that DHS handed out more than $425 million in behavioral health grants between July 1, 2022, and Dec. 31, 2024, with little evidence the money was properly monitored. The funds went to 830 organizations, most of them nongovernmental, and were intended to support mental health and addiction services.

Auditors found missing progress reports, incomplete monitoring visits and, in some cases, no documentation at all showing required oversight had occurred.

Even more alarming, the audit flagged records that appeared to be backdated or newly created during the review process, raising concerns that paperwork was retroactively produced to show compliance that did not previously exist.

In one case, the report found a grant manager approved more than $600,000 in payments and later left DHS to work for the same organization that received the funds.

“The OLA report shows a complete breakdown in how DHS’s Behavioral Health Administration manages hundreds of millions in taxpayer-funded grants,” Republican state Sen. Mark Koran said in a statement.

“BHA failed to verify that grantees were providing the services they were paid for, failed to put basic financial controls in place, and then created documentation after the fact to mislead auditors.

“Minnesotans deserve integrity from state agencies. Fabricating evidence after an audit begins is unacceptable. It obstructs the OLA’s work and prevents DHS from correcting its failures. The finding that a DHS manager approved a large grant and later became a paid consultant for that same grantee is a blatant conflict of interest. This kind of misconduct erodes public trust and undermines the effectiveness of grant programs.”

The audit also found deep internal dysfunction. Nearly three-quarters of employees surveyed said they lacked proper training to administer grants. One employee told auditors, “Executive leadership has repetitively shown staff that they won’t take the staff’s concerns or questions seriously until something serious happens or it makes the news.”

The report lands as Minnesota government faces mounting scrutiny over a broader fraud scandal prosecutors say could reach as high as $9 billion and has already driven Gov. Tim Walz to abandon his 2026 re-election bid.

“Today’s shocking report by the Legislative Auditor shows a culture of pervasive fraud, negligence, and deception,” Republican House Speaker Lisa Demuth said.

“We need answers immediately about the apparent backdating and potential falsification of documents found during the audit…It’s time to clean house and restore honesty and accountability in state agencies.”

Auditors ultimately concluded that the state “did not comply with most requirements tested for mental health and substance use disorder grants and did not have adequate internal controls over grant funds.”

“The audit makes clear that DHS leadership has failed at every level. Employees were not properly trained, oversight was ignored, and accountability was missing, from Governor Walz, to Temporary DHS Commissioner Gandhi, to BHA managers. DHS needs a full reset, starting with leadership, training, ethics, and oversight,” Koran said.

The report ignited immediate backlash online, including from an anonymous X account claiming to represent DHS employees.

“Yes, MN DHS will falsify documents and data. Worst of all, they do it to state legislature to demand more state funding,” Minnesota Staff Fraud Reporting Commentary posted. “And yes, MN DHS has lied to federal government. So.. fire Shireen Gandhi.”

🚨 BREAKING: Minnesota’s Legislative Auditor just dropped a BOMBSHELL.

Tim Walz’s DHS fabricated records, had zero internal controls, and employees ignored oversight on more than $400 MILLION in grants.

The fraud and corruption continues. pic.twitter.com/tiKitW77cg

— Dustin Grage (@GrageDustin) January 6, 2026

Townhall columnist Dustin Grage wrote, “Minnesota’s Legislative Auditor just dropped a BOMBSHELL. Tim Walz’s DHS fabricated records, had zero internal controls, and employees ignored oversight on more than $400 MILLION in grants. The fraud and corruption continues.”

Fox News Digital reached out to Walz’s office for comment.

Acting DHS Commissioner Shireen Gandhi said Monday that the audit “provides us with a roadmap for our focus going forward to continue strengthening oversight and integrity of behavioral health grants.”

“I take the report seriously, I accept responsibility for the findings,” she said.

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