Minnesota DNR Paid $2.68M in Grants With No Progress Reports
Summary
Minnesota's Legislative Auditor tested how the Department of Natural Resources managed $17.66 million in Outdoor Heritage Fund grants awarded in 2019 for wetland, prairie, and habitat conservation. Three grantees the department funded directly -- the City of Pelican Rapids, the Buffalo-Red River Watershed District, and the Wabasha County Soil and Water Conservation District -- were paid $2,679,012 across 25 payments without DNR ever collecting a single progress report, a requirement staff told auditors they were not aware of. A second finding shows DNR paid $2,096,276 more to two other grantees despite overdue reports, and $404,257 in separate payments lacked adequate documentation. DNR agrees improvements are needed and has set corrective deadlines running through October 2026.
The three grantees nobody checked on
Most Outdoor Heritage Fund money moves through grantees the Legislature names directly in law. A smaller slice moves differently: the Legislature appropriates money straight to DNR, and DNR in turn grants portions of it to partner organizations as it sees fit. For fiscal year 2020, DNR used that authority to fund three partners -- the City of Pelican Rapids, the Buffalo-Red River Watershed District, and the Wabasha County Soil and Water Conservation District. The audit's Exhibit 3 shows DNR had reimbursed those three $702,519, $1,421,198, and $555,295 respectively as of January 31, 2025, a sum that comes to exactly $2,679,012 -- the figure the audit's Finding 2 attributes to '25 payments' made 'without obtaining any progress reports from those grantees.' DNR staff told auditors they believed the reporting duty fell on DNR itself, since these grants had no legislatively named recipient to report separately -- but the underlying grant agreements required progress reports quarterly or at other set intervals, and a statewide grants-management policy independently required annual reports regardless. DNR staff said they were not aware of that policy.
View data as table
| City of Pelican Rapids | 3,151,260 | $702,519 paid of $3,151,260 awarded -- zero progress reports collected |
|---|---|---|
| Buffalo-Red River Watershed District | 1,782,000 | $1,421,198 paid of $1,782,000 awarded -- zero progress reports collected |
| Wabasha County Soil and Water Conservation District | 572,000 | $555,295 paid of $572,000 awarded -- zero progress reports collected |
A second pool of grantees, paid on a misread email
A separate slice of Finding 2 covers legislatively named grantees, where the failure ran the other direction: DNR made 10 payments totaling $2,096,276 to two grantees whose progress reports were already overdue. The paper trail auditors found traces to a single error -- staff at the Lessard-Sams Outdoor Heritage Council (LSOHC), the citizen-legislator body that recommends which OHF projects get funded, sent those grantees an email in February 2020 saying their progress reports did not need to be submitted that round. DNR read the email as an LSOHC-granted extension and kept paying. LSOHC's own guidance requires grantees to file status updates twice a year, in February and August; nothing in the audit indicates that requirement was formally waived, only that DNR treated an informal email as though it had been.
A third, smaller finding covers documentation rather than reporting: of the nearly $15 million in legislatively named grantees' reimbursement requests auditors tested, DNR paid $404,257 without adequate backup -- $399,321 across eight payments where invoice descriptions were too vague to verify ('Start of Restoration Work,' 'Construction 25% Complete'), and $4,936 across two payments with no supporting documentation at all, including one $241 charge that had already been paid once before and was paid again. DNR's own response reframes the same finding as a 97% documentation success rate on the sample tested, with a stated goal of reaching 100%.
View data as table
| Paid with zero progress reports ever | 2,679,012 | All 25 payments to 3 grantees -- 100% of that appropriation, no report ever collected |
|---|---|---|
| Paid despite overdue progress reports | 2,096,276 | 10 payments to 2 grantees; DNR misread an LSOHC email as an extension |
| Paid without adequate cost documentation | 404,257 | 10 payments to 5 grantees, out of nearly $15M tested |
Closeouts that took two years, or never happened
The audit's monitoring findings extend past payments into paperwork DNR is supposed to file after a grant ends. Auditors found closeout-evaluation problems in 10 of the 12 completed grants they tested. Eight legislatively named grantees' closeout evaluations skipped required content -- whether DNR was satisfied with the grantee's work, whether any issues remained unresolved -- and took DNR between 4 and 790 days to complete after the final payment, with four of the eight filed more than a year late. For one legislatively named grantee, DNR never completed a closeout evaluation at all: the grantee filed its final progress report in July 2022, DNR did not follow up on the outstanding reimbursement request until December 2024 -- roughly two and a half years later -- and only made the final payment, one year after the grant agreement had already ended, after auditors asked about it directly in 2025. For one of DNR's own aquatic-habitat grantees, staff told auditors they had never completed a closeout evaluation for any of DNR's aquatic habitat grants because they had only just learned the requirement existed, in a recent internal training.
- DNR paid the City of Pelican Rapids, the Buffalo-Red River Watershed District, and the Wabasha County Soil and Water Conservation District $2,679,012 across 25 payments without ever obtaining a progress report -- the entire pool of grantees DNR funded directly from its own appropriation, not the Legislature's.
- A separate $2,096,276 went to two other grantees despite overdue progress reports, after DNR treated a Lessard-Sams Outdoor Heritage Council staff email as an informal extension it was never formally granted.
- $404,257 in reimbursements to legislatively named grantees lacked adequate cost documentation -- 2.7% of the $14.98 million sample auditors tested for that purpose, which DNR's own response reframes as 97% compliance.
- Closeout evaluations -- DNR's own record of whether a grantee actually delivered -- were missing, incomplete, or filed up to 790 days late in 10 of the 12 completed grants auditors reviewed; DNR did not complete one evaluation for over three years, until auditors asked about it.
The $2,679,012 (zero progress reports), $2,096,276 (overdue progress reports), and $404,257 (undocumented costs) figures are reported separately throughout, not summed -- the audit describes them as three distinct problems in different, non-overlapping subsets of the payments tested, unlike audits where questioned-cost findings explicitly overlap. The identification of the City of Pelican Rapids, the Buffalo-Red River Watershed District, and the Wabasha County Soil and Water Conservation District as the three grantees behind the $2,679,012 figure is this piece's own cross-reference of the audit's Exhibit 3 (which names the grantees and their reimbursed amounts) against Finding 2 (which reports the $2,679,012 total but not the grantee names directly) -- the audit's own footnote confirms these are the same three grantees, and the reimbursed amounts sum exactly to the finding's total.
Sources(2) ▾
- Minnesota Office of the Legislative Auditor, Financial Audit Division, Department of Natural Resources: Outdoor Heritage Fund Grants -- Performance Audit (2026-01-15) — The Office of the Legislative Auditor's performance audit of DNR's administration of Outdoor Heritage Fund (OHF) grants awarded in the 2019 legislative session (Fiscal Year 2020 appropriations), covering the period July 1, 2019 through January 31, 2025. Contains Exhibit 2 (appropriations vs. expenses by purpose), Exhibit 3 (grantee-level ledger of amounts awarded and reimbursed), Exhibit 4 (testing scope and results), Finding 1 (grant-payment documentation) with its dollar breakdown, Finding 2 (grant monitoring, progress reports, and closeout evaluations) with its dollar breakdown, and DNR's full written response with corrective action plan and completion dates. auditor.leg.state.mn.us · original document
- Minnesota's Legacy (state Legacy Amendment portal, administered by Minnesota Management and Budget), Outdoor Heritage Fund (2026-05-15) — The state's own Legacy Amendment program page -- confirms OHF's constitutional purpose ('restore, protect, and enhance wetlands, prairies, forest and habitat for fish, game, and wildlife'), its 33% share of Legacy Amendment sales-tax revenue, and that more than 600 projects have been funded since the fund's creation. Used here only for program identity and scale, not for any audit finding or dollar figure. legacy.mn.gov · original document
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Minnesota voters created the Outdoor Heritage Fund⧉ in 2008, dedicating a third of a new dedicated sales tax to restoring wetlands, prairies, forests, and wildlife habitat. The Office of the Legislative Auditor's performance audit of one slice of that fund -- $119,867,000 the Legislature appropriated to the Department of Natural Resources (DNR) in 2019 -- tested $17,661,870 in payments the department made to grantees on the ground. It found DNR paid three of those grantees the full $2,679,012 they were owed without ever once obtaining the progress report the grant agreements required.