Understanding Recent Housing Fraud Cases

Fraud in social services funding has been big news in Minnesota since the Feeding Our Future scandal broke in January 2022. Recently, issues have arisen related to housing funding. In mid-September, eight individuals were charged with wire fraud related to Minnesota's Housing Stability Services (HSS) Program, which has provided over $200 million for housing services billed through Medicaid since 2022.  

This news hits close to home for Alliance, bringing up concerns about how bad actors exploit vulnerable populations and how they reflect on legitimate housing organizations in Minnesota. With funding instability and a government shutdown, negative perception of housing and service organizations throws another complicating factor into funding for organizations like Alliance.   

If you have questions about what happened with HSS and how it affects Alliance or have run into other folks with questions in your life, we hope the below can provide some insight.  

What happened and how did it happen? 

A few recipients provided false billing information to the Department of Human Services to get paid through the HSS program, a program which helps individuals with disabilities, seniors, and people with mental health or substance use disorders find and keep housing. Some submitted inflated hours, enrolled people without their knowledge, or didn't provide promised services. The program was designed for easy access to get individuals into housing quickly but lacked proper billing oversight and complaint follow-up. The Star Tribune published an in-depth article on the case if you want to learn more about the details: What went wrong in Minnesota’s Housing Stabilization Services program? 

Were housing nonprofits involved in the current case? 

No. The companies named (Brilliant Minds Services LLC, Faladcare Inc., and Leo Human Services LLC: Defendants Charged in First Wave of Housing Stabilization Fraud Cases | United States Department of Justice) are all for-profit companies. No non-profits have been identified in the investigation to date. 501(c)3 nonprofits are far less likely to commit this type of fraud for many reasons, but one major reason is the additional financial scrutiny we’re under to maintain our nonprofit status.   

Does Alliance receive any funds from the HSS Program? 

Alliance does not receive any HSS funding. The program was for service providers assisting people with finding housing, not housing providers themselves. Some Alliance residents may have benefited from legitimate HSS services. If any residents are affected by the program's closure, we'll work to keep them stably housed. 

What transparency does Alliance provide? 

As a 501(c)3 nonprofit, Alliance undergoes significant financial scrutiny. For example: 

• We complete an independent financial audit annually, and have received a clean audit every year. 

• We annually submit the publicly available IRS 990 Form,  that provides comprehensive financial overviews of contributions and expenses. 

This oversight makes billing-related fraud incredibly difficult for 501(c)3 organizations. Most fraud cases involve companies requiring far less oversight.  

You can search for 990s on the IRS website or platforms like GuideStar and Charity Navigator, which also provide transparency rankings.   

What should I say to people hesitant to donate to housing organizations because of this fraud? 

Here are a few ways you can respond: 

First, remind them that their diligence is a good thing! Ensuring that contributions go to the intended cause is an important part of being a donor, and something nonprofits should work to make as transparent as possible. 

Second, if they’re concerned about organizations they support committing fraud, remind them that companies facing legal action are most always going to be for-profit entities due to the lack of oversight.  

Third, encourage them to investigate what funding transparency the organization provides. Visit their website and see if they have 990s, independent audits, or annual reports available or available by request. Additionally, there are other verification processes that nonprofits can undergo to increase transparency. For example, the Charities Review Council is a Minnesota based organization which conducts a reviews and offers a published list of reviewed organizations that meet their standards: Organizations Archive » Charities Review Council. GuideStar and Charity Navigator are additional resources to consult. 

While these fraud cases are deeply concerning, they underscore the importance of supporting transparent, accountable nonprofits like Alliance that are committed to serving our community with integrity. If you have further questions about the case, or about Alliance’s finances, we encourage you to reach out. We’d be happy to talk more with you!