Minnesota state government showered more than $1.1 billion directly to nonprofits in the 2023 legislative session through legislatively named grants. What could go wrong? Plenty. There are many problems inherent in this approach to delivering government services. Most prominent among them is due diligence. State agencies typically award a grant after performing background checks and analyzing proposals, giving it to the applicant that best meets their criteria. But nonprofits can also receive funding by being directly named in the legislature’s budget bills—through what are known as legislatively named grants—and since 2021 there has been a bonanza for this type of funding.  Some of these groups received more money from the legislature than they normally receive in other grants and donations in an entire year.

Among them was a Minneapolis anti-violence nonprofit called “A Mother’s Love”, run by former police officer Lisa Clemons. In the rush to support favored nonprofit groups, lawmakers never examined “A Mother’s Love’s” operations or finances, despite earmarking $3 million to the group in the two-year budget of the Department of Employment and Economic Development (DEED). This eclipsed the $1.13 million the nonprofit raised from all sources in 2022.

Two years earlier, a state unemployment law judge found “A Mother’s Love” had misclassified workers as independent contractors, which Attorney General Keith Ellison, DFL lawmakers and the administration of Gov. Tim Walz have sought to crack down on because it deprives workers of basic protections like workers’ compensation insurance, overtime and unemployment benefits.

So even as DEED found that “A Mother’s Love” misclassified workers, lawmakers directed DEED to give the nonprofit $3 million. “A Mother’s Love” still has 30 independent contractors, according to Clemons, its executive director. “A Mother’s Love’s” IRS tax forms point to other irregularities: The group owns a $360,000 building — actually a home that was purchased for them in 2022. Prior to this they had no office, except “the car trunks of its members”.

At the same time, it reported occupancy costs — such as utilities, insurance, repairs and maintenance — of $299,000 in 2022, according to its IRS filing. “A Mother’s Love” is just one of hundreds of nonprofits that used their legislative connections to win money from lawmakers last year, sidestepping the onerous process of competing for grants from state agencies. It was so much money that the state’s budget agency couldn’t provide an accounting of it all when asked for one.

Nonpartisan Senate researchers asked departments for an accounting and found over 300 direct allocations to nonprofits through 2025 — not counting the state departments of health and human services, which failed to provide the data. (There were 36 more allocations in health and human services budget bills).

State government increasingly relies on nonprofits to complete its work, from preventing violence to encouraging vaccination. State agencies typically award a grant after performing background checks and analyzing proposals, giving them to the applicant that best meets their criteria. But nonprofits can also receive funding by being directly named in the legislature’s budget bills — through what are known as legislatively named grants — and 2023 was a bonanza for this type of funding. Lawmakers gave money to nonprofits to study ending cash bail, treat cops with post-traumatic stress disorder, construct buildings, prevent homelessness, and hold cultural festivals, build a Somali museum, for example.

In the case of “A Mother’s Love”, the grant was an attempt to solve a thorny political and policy problem that’s emerged, especially since the 2020 death of George Floyd: Crime, though falling, is still elevated from pre-pandemic levels, but many Minnesotans — city-dwellers in particular — lost confidence in conventional policing to stop the violence. So legislators turned to a bevy of nonprofit groups promising to quell violence without police.

Clemons, the executive director, founded the nonprofit in 2014 to help black women enduring trauma. Inspired by her police experience, Clemons initially ran the nonprofit out of her own pocket. “I wanted to use my lens as a Black mom in the community and a retired cop,” she says.

Operating out of the pink-trimmed North Minneapolis house it was gifted, the group has expanded its mission, wearing its trademark pink T-shirts while helping homeless and addicted people, working with Metro Transit to keep buses safe and responding to murder scenes to bridge the gap between the police and community. Clemens is one of several nonprofits hired by the city of Minneapolis to be so-called “violence interrupters.

The effectiveness of such groups has been called “unproven” by a criminologist at John Jay College. The state is not evaluating their effectiveness, however. The backdrop of the legislature’s efforts to boost nonprofits is what’s become known as the Feeding our Future scandal, the wide-ranging scheme in which 70 Minnesotans (so far) have been charged with funneling pilfered government money through nonprofits. Federal prosecutors charge that Feeding Our Future orchestrated the theft of about $250 million worth of federal child nutrition funds, the nation’s largest pandemic relief-related fraud.

State government already struggles to oversee money apportions as grants, according to a 2023 audit. The Office of the Legislative Auditor (OLA) found pervasive noncompliance” with grant management policies, “signaling issues with accountability and oversight” of the $500 million the state grants in a typical year.

In 2007, the OLA found the state had a fragmented approach to managing grants and lacked oversight and accountability. So the legislature set up a Grants Management Office to strengthen accountability, but last year auditors still found compliance problems in numerous state agencies. Agencies failed to do financial reconciliations, site visits, and progress reports, and didn’t withhold payments to grantees with past-due progress reports.

The 2023 audit found the situation is even worse with legislatively named grants. The state Department of Education, which was the pass-through agency for the stolen federal child nutrition funds, “consistently documented less fiscal and programmatic oversight of legislatively named grants compared to competitively awarded grants,” according to the audit.

The widespread use of these legislative grants has divided Minnesota’s robust nonprofit sector, with some questioning the wisdom of a system that favors politically connected nonprofits. Nonprofit lobbyists have successfully lobbied for millions of dollars for their nonprofit clients. American Indian OIC, the Northside Achievement Zone and the Somali Museum — three groups who employed lobbyists — received nearly $8 million total in legislatively named grants.

Legislative grants are supposed to be subject to the same oversight and monitoring as all other state grants, said Marie Ellis, public policy director for the Minnesota Council of Nonprofits. Sometimes, she said, the direct grant doesn’t even get awarded if a nonprofit doesn’t pass the pre-award risk assessment, which was strengthened last year. (This conflicts with the 2023 OLA audit, however, that found the oversight isn’t happening.)

Ellis said the OLA audit made clear that state agencies don’t have the resources they need to oversee grants, so the nonprofits council helped lobby to add more staffing and funds for the grants management office. Chuck Johnson, former DHS deputy commissioner, said direct allocations to nonprofits can be a headache for agencies to oversee. “It’s particularly frustrating when (the legislature does) that and when they somehow expect an agency to oversee those dollars,” Johnson said. “How can we oversee it? We didn’t have any role in the money being allocated.”

In 2023-2024 session, the DFL trifecta approved far more direct allocations than usual. There was little vetting. Johnson stated, “There were some that just came through (that were) brand new, with no track record, no nothing. We couldn’t tell if these were legitimate organizations or not.”

The legislature approved a $35 million package of “equity grants” in 2016 to alleviate economic and employment inequality. The reporting coming back was minimal or nonexistent.” In 2017, DEED froze payments for over a year to a nonprofit collaborative called Emerge Community Development for not meeting goals and problems with financial management and progress reports. Emerge sued the state to release the remainder of a $4.25 million grant. They won.

One of Emerge’s partners was the Stairstep Foundation, a nonprofit founded in 1992 to work with churches on social issues. Sen. Bobby Champion (DFL – Minneapolis), president of the senate at the time, worked for Stairstep until about 2004. When Emerge and DEED got into a legal dispute over the grants, Champion sided with Emerge, accusing DEED of not acting in good faith.

Champion’s executive assistant, Shemeka Bogan, was moonlighting for the Stairstep Foundation. Emerge supported a workforce bill last session, co-authored by Champion, with $25 million per year for small, community-based nonprofits to conduct job training for 400 workers. As chair of the jobs committee, Champion oversaw over $300 million in direct allocations to nonprofits — including two to Stairstep: over $500,000 in “community-based workforce development efforts” and $1.2 million in tourism dollars for African American cultural festivals and events. Separately, Stairstep was awarded $1 million for housing and homelessness prevention.

Stairstep’s 2022 tax filing shows nearly $1 million spent on contractors and more than $153,000 on office expenses. That was about 10% of Stairstep’s gross revenue spent on office expenses. The Legislature’s grants to Stairstep totaled $2.7 million, dwarfing the group’s total 2021 revenue of $1.5 million. Emerge also got a $1 million direct appropriation through DEED.

Another non-profit in the list is named Isuroon. Founded more than 10 years ago, Isuroon provides a wide range of social services focused on Somali women in Minnesota. Its CEO and founder is Fartun Weli. Early last month, the Minneapolis Star Tribune published a profile of the Somalia-born Weli and her nonprofit. The Star Tribune reports that the word “isuroon” means “women who take care of themselves financially, emotionally and socially” in Weli’s native language. Google Translate returns with the single word “peace.”

Weli’s Isuroon is set to received $1 million in a direct appropriation through the state’s Dept of Employment and Economic Development (DEED) plus another $3 million through DEED for a building project in 2023. The $1 million grant was for Isuroon to provide entrepreneurial training to African immigrant women in Minnesota. It was included in SF 3035, DEED’s budget bill, whose House author was Rep. Hodan Hassan (DFL-Minneapolis). Hassan also authored two other bills to provide direct grants to Isuroon.

The $3 million was included in the state bonding bill last year (HF 670) and is earmarked to renovate Isuroon’s current headquarters building, located on Lake Street in south Minneapolis. It’s not clear what compelling statewide interest lies in a multi-million-dollar renovation of an obscure nonprofit headquarters. But here we are.

Isuroon owns a small, multi-tenant office building at 1600 East Lake Street, having purchased the property in 2017 for $750,000. The nonprofit borrowed money to pay for the building. The combined $4 million in state money is larger than the nonprofit’s annual revenue in any year of its existence, according to filings made by Isuroon with the Internal Revenue Service (IRS) and accounting audits of the company. In fact, Isuroon was a rather modest affair, pre-Covid. In 2020, the non-profit revenue tripled, to more than $3 million. Of that amount, about $500,000 came from private-sector donations and more than $2,500,000 came from government grants.

Most of that government money ($1,559,583) went toward providing Covid-related housing grants to 571 households, for an average of $2,700 per recipient. The year 2020 was notable for another reason. In February 2020, Isuroon’s founder, Fartun Weli, registered the Somali American Women Political Action Committee (PAC) with the state’s Campaign Finance Board (CFB). Weli serves as the PAC’s chair. The PAC and the nonprofit share the same address. The PAC was seeded in 2020 with a donation from Isuroon.

Strictly speaking, they can’t do that. Isuroon is organized as a 501c3 (charity) nonprofit, whose donors are eligible for tax deductions. Here is the Q&A on this topic at the official IRS website:

May a section 501(c)(3) organization make a contribution to a political organization described in section 527 (such as a candidate committee, political party committee or political action committee (PAC))?

2022 saw the nonprofit’s revenue shrink further, to $1.5 million. The company showed a net loss of $390,000. On the positive side, the debt load had fallen to $1.7 million. Fast forward to 2024, and the taxpayer-funded renovation of Isuroon’s Lake Street headquarters has been completed.

This new and disturbing trend in state government to use bonding dollars (borrowed money) to fund new buildings for private, non-profit companies has escalated since 2020. Traditionally, state-taxpayer-funded bonding projects included grants mostly to state agencies and local units of government to fund infrastructure and public facilities. But the times are a changing.

The Norway House is a cultural center located in Minneapolis, founded in 2004. In 2024 the nonprofit received a $5 million grant to acquire land and pre-design, design, construct, furnish, and equip a conference and event center at 913 East Franklin Avenue and adjacent property, to celebrate the culture of Norway and American Norwegians. The original bill funding the Norway House project (HF 1365) was carried by local state Rep. Hodan Hassan (DFL-Minneapolis). This is the same legislator who promoted a grant for Isuroon and Fartun Weli. The Swedes must be very upset with these circumstances.

Another nonprofit to find favor was the Somali Museum of Minnesota, founded by Osman Ali in 2011 as the Somali Artifact and Cultural Museum. The Museum was originally located in the basement of this building on Lake Street in south Minneapolis. A sign for the museum is displayed in the building’s marquee.

The Museum had the misfortune to be located in a building (JigJiga Center) owned by two defendants (Nos. 36 and 38) in the Feeding Our Future scandal. Coincidentally? One of those, Liban Alishire, has pled guilty in the case. So, the Museum’s desire for new digs for its “growing” collection is understandable. The 2024 bonding bill provided $3.9 million for a new facility. The money will be used to predesign and design a facility in the city of Minneapolis to be used for a museum of Somali relics and artifacts, Somali cultural history, and education. The very busy, generous Rep. Hassan was once again the author of the grant.

So, this $4 million would not even get a building. In 2023, Rep. Hassan introduced a bill that would have used taxpayer money to pay for the entire project. HF 3882 would have given the Museum $10 million, “to acquire land and predesign, design, construct, furnish, and equip a facility to be used for a museum…”

In 2022, $10 million would have covered the entire project. Now $4 million will cover just two of the project’s six phases. As pre-construction activity is usually just a fraction of the total project cost, the final number ranging from the original $10 million proposed (plus inflation) up to $100 million. All at state taxpayer expense.

That’s not all the money showered on the Somali Museum in 2023 by state Democrats. The Museum also received $400,000 from the state tourism board (SF 3035). The Museum received 1/3 from a total $1.2 million that the legislature earmarked “for Somali community and cultural festivals and events.” The Museum received another $250,000 out of the state’s Legacy Fund (HF 1999), “for heritage arts and cultural vitality programs to provide classes, exhibits, presentations, and outreach about the Somali community and heritage in Minnesota”.

Of the three direct appropriations, only the one for $400,000 was the subject of a separate bill at the legislature (HF 1072). The other two grants appeared, ex nihilo, in the final bills passed into law. The Museum’s three direct appropriations from last year totaled $4,550,000. In the Museum’s entire previous history, the highest annual revenue totaled a mere $373,220 (up to 2022),

These won’t be the first state grants received by the Museum. The state’s Arts Board records making grants to the Somali Museum totaling $166,000 over the previous five years. So what do we have to show for all this? Currently the Somali Museum occupies a space in the Midtown Global Market at 2925 E. Lake St. It is open Thursdays through Sundays from 11 – 5 pm with a nominal admittance charge of $11. Sorry, it still has only 700 “artifacts”.

The Somali Museum is just one of 22 museum grantees last year. It didn’t even get the largest museum grant, its $3.9 million ranks a distant 3rd. Norway and Somalia have much international company on the list of ethnic grantees. The sixteen pages of grants also list recipients representing African, American Indian, Asian, Black, Chicano, Hispanic, Hmong, Indian, Indigenous, Latino, Native American, and Ukranian interests.

Norway and Somalia have much international company on the list of ethnic grantees. The sixteen pages of grants also list recipients representing African, American Indian, Asian, Black, Chicano, Hispanic, Hmong, Indian, Indigenous, Latino, Native American, and Ukranian interests. If you feel left out, stay patient. An $8 million proposal (HF 4299) to fund Swedes is still under consideration for 2025. The Germans and Russians must be feeling left out.

But as the legislature giveth, it taketh away, too. Most of the money to nonprofits was one-time funding, and the state’s fiscal outlook has changed after the go-go 2023 session. Forecasters now project a “structural imbalance” in the budget, beginning in 2025. If legislators are forced to make tough choices about schools, health care and housing, nonprofits may be first on the chopping block. Maybe they should be on the chopping block in any case. It is OUR money being spent/wasted.

Minnesota Rerormer “1.1 Billion in Grants Bonanza