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Gov. Tim Walz said a new report last week that scrutinized the state Education Department for its lack of oversight of Feeding Our Future, the nonprofit at the center of a massive FBI fraud investigation, is a "fair critique."

But, he added, the state agency has improved oversight measures to prevent fraud, and he defended state employees for their work during a crisis.

"We can always do better. Again, context matters; it was a challenging time for everybody," Walz said of 2020 when the pandemic shuttered schools and organizations were rushing to get food to children in need. "We certainly take responsibility for that."

The Office of the Legislative Auditor, a nonpartisan office that audits state government, released its 120-page special report last week, criticizing the Education Department's inadequate oversight of Feeding Our Future, which "created opportunities for fraud," and said it failed to act on warning signs in the meal programs.

When asked Monday about the report at a news conference on other subjects, Walz thanked the Legislative Auditor's Office for the report and the Legislature for adding new tools for the Education Department, including hiring an inspector general to investigate fraud allegations.

The U.S. Department of Agriculture reimburses schools, nonprofits and day cares for feeding low-income children after school and during the summer. The programs are administered in Minnesota by the Education Department, which enforces federal rules.

Legislative Auditor Judy Randall told a bipartisan group of lawmakers last week that the Education Department and other state agencies don't have a regulatory mindset; instead, employees are focused on helping organizations with technical assistance in submitting federal reimbursements.

An FBI agent testified in the recent trial that the FBI opened its investigation after Education Department employees reported concerns, but Randall said her office saw no documentation of that, and instead, the FBI contacted the department in February 2021 before the department and FBI met two months later.

State Republicans said the report "vindicated" them for criticizing the Education Department in 2022 for not stopping the alleged fraud sooner, holding hearings that year, soon after the FBI investigation became public. Last week, Republican leaders blasted Walz for not holding agencies accountable and asked if Education Department employees will be disciplined.

When asked about that on Monday, Walz said: "This wasn't malfeasance."

"There's not a single state employee that was implicated in doing anything that was illegal. They simply didn't do as much due diligence as they should've," Walz said, noting that the agency has a new commissioner, Willie Jett, who started in 2023.

In 2022, Education Commissioner Heather Mueller defended the agency's diligence in detecting possible fraud and reporting it quickly to federal authorities since the state agency didn't have investigative authority at the time. Republicans running for election that year called on her to resign. She later left the agency as part of Walz administration changes.

Earlier this month, a jury convicted five of seven defendants in the first case to go to trial. Those seven were among 70 people charged in an overall $250 million fraud scheme of the meal programs. Of the 70 people, 18 have pleaded guilty, one died and one fled the country. Other trials are scheduled for later this year.

The defendants were accused of submitting phony invoices and rosters of made-up children's names to collect millions of dollars in federal funding, spending it on luxury cars, homes and trips.

"I'm grateful to our legal system, that there's folks going for lengthy prison sentences, as they should, for stealing money from children at a time of a global pandemic," Walz said. "These are folks that took advantage of the system."

Star Tribune staff writer Rochelle Olson contributed to this story.