Walz promotes fraud-era DHS finance chief to run the agency covering 1.2M Minnesotans’ health care

Walz makes his DHS pick official

Gov. Tim Walz permanently appointed Shireen Gandhi as commissioner of the Minnesota Department of Human Services on Feb. 23, 2026.

Gandhi had served as temporary commissioner since February 2025, when she replaced Jodi Harpstead after more than five years at the helm.

Walz praised Gandhi for strengthening program integrity and working to root out fraud.

The agency covers health care for about 1.2 million Minnesotans on Medicaid, and Gandhi said she wants to make the state a national model for accountability.

Gandhi rose through the DHS ranks

Gandhi joined DHS in 2017 with more than 20 years of health care leadership behind her.

She worked her way up from assistant commissioner and chief compliance officer, where she built a new compliance system, to deputy commissioner overseeing budgets and financial operations.

She holds a bachelor’s degree from the University of Minnesota and a law degree from Hamline University School of Law. She also chairs the Health Law Section of the Minnesota State Bar Association.

Massive fraud put Minnesota under a microscope

The trouble started with Feeding Our Future, a $250 million COVID-era scheme in which a nonprofit claimed to feed schoolchildren but stole federal funds instead.

That case ran through the Minnesota Department of Education, not DHS, but it triggered a wave of scrutiny across state agencies.

Federal investigators then found alleged fraud in DHS-run programs covering housing assistance, autism services, and child care. More than 90 people now face federal fraud charges.

A top federal prosecutor estimated total fraud across all programs could reach $9 billion, though state officials say that number is unconfirmed.

Third-party audit flags over a billion dollars

In October 2025, Walz ordered a third-party audit of 14 Medicaid programs considered high risk for fraud. DHS hired Optum, a subsidiary of UnitedHealth Group, to review fee-for-service claims data.

The initial report, released in February 2026, flagged about $1 billion in claims that may be vulnerable to fraud because of vague policies and weak oversight.

Optum also found about $52 million in claims that clearly broke existing state policy. Officials stressed neither figure represents confirmed fraud.

Autism services raised the biggest red flags

More than 90% of claims from Medicaid-funded autism intervention providers did not match clear policies or procedures, according to the audit.

The number of autism service providers in Minnesota jumped from 41 in 2018 to 328 in 2023.

DHS Deputy Commissioner John Connolly called the 90% figure a “huge concern” but said the department still needs to verify it with Optum. Federal prosecutors have separately charged people with fraud in autism services.

Large sections of the Optum report were blacked out, frustrating lawmakers who wanted more details.

State watchdog found grant oversight failures

A January 2026 audit by the Office of the Legislative Auditor found DHS’s Behavioral Health Administration failed to meet most requirements for overseeing grants.

The audit covered about $425 million sent to 830 organizations between July 2022 and December 2024. Auditors discovered staff backdated or created documents after the audit began.

The legislative auditor called that move unprecedented in her 27 years with the office. More than half of required progress reports were missing or late.

Gandhi called the document changes “absolutely unacceptable.”

DHS added new anti-fraud tools under Gandhi

DHS hired Optum to build a pre-payment review system that flags suspicious claims before money goes out. The department also expanded data analytics to spot unusual billing patterns.

In 2025, DHS imposed more payment withholds on suspected fraudulent providers than in previous years and added fingerprint-based background checks for Medicaid provider business owners.

The agency also began recruiting more than 150 temporary employees to conduct on-site inspections of over 5,800 providers statewide.

Republicans split on the appointment

House Speaker Lisa Demuth called the appointment long overdue and said she hopes Gandhi will lead a stronger fraud prevention effort.

House committee chair Joe Schomacker said the move should bring stability and accountability.

But House Floor Leader Harry Niska took a harder line, saying the promotion sends the wrong message when Minnesotans want real accountability.

Niska pointed out that no DHS employee or commissioner has faced discipline for letting the fraud happen. State Sen. Paul Utke called the appointment misguided.

Gandhi’s own words drew pushback

In a September 2025 interview, Gandhi said her team did not understand how complex the fraud schemes targeting housing assistance really were.

She told lawmakers the claims coming into DHS looked legitimate on their face.

Then at a recent hearing, Gandhi said she does not think Minnesota has a fraud problem different from any other state. Critics jumped on that comment as dismissive.

DHS also launched a fact-check webpage pushing back on what the agency called misleading claims about the scale of fraud.

Walz dropped his reelection bid over the fallout

On Jan. 5, 2026, Walz announced he would not seek a third term as governor, saying he needed to focus on fighting fraud instead of running a campaign.

The decision came after months of growing pressure from federal investigators, the Trump administration, and national media.

A viral video by conservative YouTuber Nick Shirley alleging fraud at Minneapolis-area child care centers brought more national attention in late December 2025.

The Trump administration then froze federal child care funding to Minnesota. Walz’s term ends in January 2027, meaning Gandhi may serve less than a year in the permanent role.

DHS faces a packed reform schedule

Optum’s pre-payment review work runs through the end of 2026.

DHS is also revalidating all 5,800 providers in high-risk Medicaid programs on site, a big shift from the old cycle of checking every three to five years.

The 2026 Minnesota legislative session, which opened Feb. 17, is expected to focus heavily on fraud prevention.

Federal investigators continue their probes, though six federal prosecutors resigned in early 2026, complicating ongoing cases. The Centers for Medicare and Medicaid Services has also launched its own audit.

Oversight gaps go back years

The Office of the Legislative Auditor has warned about weak oversight at DHS for years, with some findings going back decades. A 2019 review flagged problems with the Child Care Assistance Program’s internal controls.

State officials say fraud schemes have grown more organized and sophisticated, outpacing the tools DHS had to catch them.

Deputy Commissioner Connolly said the agency’s old tip-based investigation approach was not up to the task.

Gandhi has pledged to close audit findings and strengthen controls, but the 2026 governor’s race will likely decide whether she stays on.

This article was created with AI assistance and human editing.

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