Minnesota Governor Tim Walz is under growing pressure as questions mount about his administration’s oversight of a state housing program that was shut down amid allegations of widespread fraud. The controversy comes just days after Walz announced his bid for a third term, putting his record on government accountability in the spotlight.

Federal Involvement After Fraud Allegations Surface

The Minnesota Department of Human Services (DHS) confirmed that federal officials have been asked to assist in the termination of the Housing Stabilization Services program, which was initially created to help older adults and people with disabilities secure stable housing.

DHS’s temporary commissioner, Shireen Gandhi, formally requested federal involvement, citing what she described as “credible allegations of fraud” and “exponential growth in spending.”

The program, launched in 2017, was funded through Medicaid and began with an annual budget of about $2.6 million. However, costs ballooned to $107 million by 2024, according to figures reported by the Minnesota Star Tribune.

The sharp increase in spending, combined with growing concerns about false claims and mismanagement, prompted state and federal reviews into how funds were distributed — and whether oversight mechanisms failed to prevent misuse.

Lawmakers Demand Answers

The Republican-led House Fraud Prevention and State Agency Oversight Policy Committee scheduled a hearing this week to question DHS officials about the program’s collapse and the extent of the suspected fraud.

Committee members say they want to know how such large-scale abuse went unnoticed for years and what steps are being taken to recover misused funds.

However, about 45 minutes before the hearing began, Walz announced a new initiative: an executive order establishing a statewide Inspector General Coordinating Council, to be led by the Minnesota Bureau of Criminal Apprehension (BCA).

The council, according to Walz, will focus on improving cooperation among law enforcement and state agencies to detect fraud more effectively. Yet critics argue the timing of the announcement — just before a legislative hearing — appeared designed to deflect political pressure rather than present real accountability measures.

“The governor is trying to show leadership, but this looks like damage control,” said Rep. Jim Nash (R-Waconia), a member of the oversight committee. “Minnesotans deserve answers about why hundreds of millions of dollars were wasted before the administration acted.”

Walz Defends Administration’s Actions

Governor Walz has defended his administration’s handling of the matter, insisting that state officials are aggressively pursuing those responsible.

“If you’re going to commit these crimes in Minnesota, you are going to get caught,” Walz said in an interview with WCCO. “You’re always going to find people trying to cheat the system. But this legislative session, with the new Inspector General, new tools, and expanded capacity, we’re improving accountability.”

Walz also mentioned his interest in using artificial intelligence tools to detect fraudulent activity more effectively. “One thing I wish we would have gotten more support for is AI tools — they could really help us track suspicious patterns faster,” he said.

In a written statement, Walz reiterated his administration’s stance:

“We have no tolerance for fraud in the state of Minnesota. Abuse of taxpayer dollars takes resources away from the people who need them most. If you commit fraud in Minnesota, you will be prosecuted and held accountable to the fullest extent of the law.”

Pattern of Scandals Adds to Pressure

Despite the governor’s assurances, recent high-profile fraud cases have damaged public confidence in Minnesota’s oversight of federal and state programs.

Among the most notable was the Feeding Our Future scandal, in which individuals were accused of diverting tens of millions of dollars from federal child nutrition programs meant to feed low-income children during the pandemic.

Other investigations have uncovered fraud in the state’s autism assistance program, Medicaid billing schemes, and housing aid programs, with several cases still pending in federal court.

Critics argue that these repeated scandals point to systemic weaknesses in oversight under Walz’s leadership.

“Minnesota has seen one fraud case after another under this administration,” said Sen. Karin Housley (R-Stillwater). “It’s not enough to promise accountability after the fact — taxpayers need to see it in action.”

Political Implications for Walz’s Re-Election Bid

The timing of the latest revelations could pose political risks for Walz as he campaigns for a third term in 2026. While the governor remains popular among Democrats and progressive voters, concerns about fiscal oversight and transparency could become focal points for Republican challengers.

Political analysts note that the Housing Stabilization Services controversy mirrors broader national debates about the balance between expanding social programs and ensuring they are managed responsibly.

“Governor Walz has positioned himself as a champion of compassionate governance,” said Dr. Alicia Morton, a political science professor at the University of Minnesota. “But this case could test voters’ confidence in his ability to manage large public programs without waste or abuse.”

Administration Highlights Reforms

In response to the criticism, Walz’s office has highlighted several steps already taken to strengthen anti-fraud efforts across Minnesota agencies.

These include:

• Establishing a new Inspector General within DHS, tasked with monitoring fraud prevention and enforcement.
• Expanding data-sharing agreements between agencies to identify suspicious transactions.
• Partnering with federal investigators to trace fraudulent claims and recover misused funds.
• Increasing funding for compliance staff and digital monitoring tools.

Administration officials argue that these measures demonstrate a proactive approach, not a reactionary one.

“Fraud is an unfortunate reality in any large system,” said DHS spokesperson Emily Piper. “But Minnesota is leading the way in transparency and innovation when it comes to uncovering abuse.”

Public Reaction Divided

Public opinion in Minnesota appears split. Some residents say Walz’s reforms are overdue but necessary, while others view the repeated scandals as evidence of deeper issues within state governance.

“It’s good that he’s doing something now, but why did it take so long?” asked Minneapolis resident John Ellison. “If this kind of money went missing in a private business, heads would roll.”

On social media, the governor’s announcement of the new Inspector General Council drew both support and skepticism. Critics accused him of reacting only after media coverage intensified, while supporters praised his focus on improving coordination and enforcement.

What Comes Next

Federal and state investigators are expected to continue reviewing financial records related to the Housing Stabilization Services program. While no formal charges have yet been announced, officials say the investigation could expand as new evidence emerges.

Meanwhile, Walz is likely to face continued questioning from lawmakers in the coming weeks, as legislative committees press for more details about how the program was managed and what safeguards will be in place moving forward.

As the controversy unfolds, it remains to be seen whether the steps taken by the governor’s office will be enough to restore public trust — or whether the fraud scandal will linger as a defining issue heading into Minnesota’s next gubernatorial race.