Oversight of federal child nutrition programs is intensifying in Minnesota again as the state returns to pre-pandemic rules for feeding needy children.

While that is welcome news to many longtime nonprofit meal providers, several said they also worry the allegations of a $250 million food fraud scandal will spur new regulations that could make it more difficult for legitimate organizations to distribute food to low-income children.

“In general, it’s more difficult to bring on new sites now because of the extra oversight and due diligence … justifiably,” said Marcus Pope, president of Youthprise, a Minneapolis nonprofit that’s participated in nutrition programs since 2015. “We recognize that there will be additional scrutiny but the scrutiny shouldn’t be at the level it prevents people who have done the work well from being able to continue to do the work.”

Federal waivers loosened rules and oversight when COVID-19 first arrived. Regulators with the Minnesota Department of Education (MDE), which administers the federal program, reduced in-person visits to examine meal distribution, for instance. And meals could be sent home instead of requiring children to eat at a dining site. The more lax rules opened the door to the fraud scheme that federal prosecutors say is the largest pandemic-related fraud in the country.

Those waivers all ended by June 30, returning the state to more rigorous pre-pandemic rules.

Now, nonprofit leaders say, the programs will likely “self-correct” from the high numbers of meals reported during the pandemic. Setting aside the alleged fraud, legitimate organizations were serving more meals during the pandemic because schools were closed and families could pick up multiple meals at once, nonprofit leaders said.

The return to pre-pandemic rules is already slowing down approval of new sites and preventing some organizations from participating, providers said.

Officials from MDE declined an interview request for this article.

To try to dispense food quickly and safely amid the pandemic and school closures, the U.S. Department of Agriculture (USDA), which funds the programs, granted Minnesota more than 100 waivers. The waivers let for-profit restaurants participate and allowed distributors to give to-go or packaged meals that families could make at home instead of the pre-pandemic model of dishing out hot meals in dining sites. Some in-person monitoring requirements were also lifted, reducing visits by sponsoring agencies and MDE.

“It was just, in my opinion, a perfect storm,” said Christa DeBoer, Youthprise’s nutrition program director. “People potentially took advantage of that while the rest of us focused on serving the communities.”

Over three summer months, providers across Minnesota claimed to serve 37 million meals in 2021, up from 3.5 million meals the summer of 2019.

Ellie Lucas, CEO of Hunger Impact Partners, a statewide advocacy group, said COVID and the economy weren’t enough to drive up such explosive growth.

“The numbers indicated that [the state was] feeding more children than existed,” she said.

Federal prosecutors say that defendants associated with Feeding Our Future inflated their meal counts and submitted fraudulent invoices, making up names of children on attendance rosters. They say co-conspirators created shell companies to launder the money, traded kickbacks and bribes, and used the scheme to get rich, paying for goods such as Porsches and luxury homes.

Feeding Our Future leader Aimee Bock has denied any wrongdoing and some of the 49 people charged so far have also pleaded not guilty. Prosecutors have called it the first set of charges in a continuing investigation.

The return to pre-pandemic rules means hot meals need to be served to kids in congregate dining.

Longstanding Minneapolis nonprofit Loaves & Fishes decided to keep serving to-go meals this summer because clients preferred it, said executive director Cathy Maes, but that meant that when the waivers ended, the nonprofit wasn’t eligible for about $50,000 in federal money.

Most of Feeding Our Future’s former sites have also been sidelined. Prosecutors haven’t alleged that all of Feeding Our Future’s sites were fraudulently operated, saying in indictments that some sites did purchase and serve a small amount of food.

According to MDE, just 13 of Feeding Our Future’s more than 100 sites have signed on with a new sponsor so far, most through Edina-based Provider’s Choice.

Meal sites can either apply through MDE to be self-sponsored or contract with a sponsoring agency to oversee the complicated paperwork and reimbursements.

Fardowsa Ali worked with Feeding Our Future during the pandemic and applied to be her own sponsor, but she said MDE rejected her twice. She said she’s still feeding children at Hooyo Child Care Center in Minneapolis, but without any federal reimbursements she has to pay for the meals herself.

“They are not helping us,” she said of MDE. “We tried to apply and they rejected our application. We applied again and they gave us a bunch of really difficult things to do.”

MDE has referred former Feeding Our Future sites to Youthprise and other nonprofits and school districts.

Several of Feeding Our Future’s former sites have also contacted Youthprise looking for a new sponsor. But unlike Feeding Our Future, Pope said Youthprise provides food to sites so it can have more control over quality and compliance. Pope said once some inquiring sites learned that, they stopped the application process.

“You have a lot of sites that are just in limbo right now because of everything that’s going on,” he added. “There are some legit sites that are challenged by this. But there are some sites that didn’t do right. … We want to serve the community and we want to serve sites, but we don’t want to work with folks who haven’t done right by the system.”

Youthprise’s vendor, CKC Good Food, operates a sprawling 42,000-square-foot warehouse and office building in Eagan. Nancy Close started CKC more than three decades ago after her Afghan restaurant in St. Paul kept getting requests to provide meals to child care centers and schools. Now, she said her business prepares more than 17,000 meals a day for more than 150 schools and nonprofits.

“There’s no money in it. You make pennies on it,” Close said.

The USDA sets reimbursement rates and nutrition guidelines, for instance, stipulating how much protein, calories and sodium every meal must have.

Some nonprofits now fear the Feeding Our Future scandal will decrease trust in nonprofits and add regulations. Minnesota is one of seven states where the state agency doesn’t have administrative rulemaking authority. The Legislature would have to sign off on any policy changes.

Lucas of Hunger Impact Partners is pushing for changes, including limiting the number of sites under a newly formed sponsor and streamlining record-keeping. She said there’s a fine line between overregulation and rooting out fraud.

“The most important thing,” she said, “is that the people operating the federal programs are operating with integrity so the meals get to the children who deserve them.”

Staff writer Jeffrey Meitrodt contributed to this report.