The Minnesota Court of Appeals determined the state followed federal rules when it rejected a Minneapolis nonprofit from a meals program — the same program now under scrutiny amid the massive Feeding Our Future fraud investigation.

This week, the Court of Appeals upheld the Minnesota Department of Education's decision to deny Gar Gaar Family Services from participating in federally funded programs that reimburse organizations to provide food to low-income kids after school.

An attorney for Gar Gaar, also known as Youth Leadership Academy, argued the Education Department rushed to take action and arbitrarily denied the nonprofit from participating in the meals program in the wake of the Feeding Our Future case.

Feeding Our Future is accused of being at the center of a more than $250 million fraud scheme, using federal reimbursements meant to pay for meals for children in need to instead purchase luxury cars, lakefront homes and other extravagances. So far, 50 people have been charged or indicted in what prosecutors say is the largest pandemic-related fraud case in the nation.

In the 15-page opinion, written by Judge Lucinda Jesson, the court determined that the Education Department's decision to reject Gar Gaar followed federal regulations and relied on substantial evidence that Gar Gaar wasn't financially viable or did not have proper financial management.

Gar Gaar's attorney Barbara Berens said Thursday the nonprofit is disappointed and faced a difficult fight against a state agency.

"It's constrained by what the agency had already done," she said of the Court of Appeals. "It is an uphill battle. And Gar Gaar still believes that they are getting judged by other entities' conduct."

Kevin Burns, a spokesman for the Education Department, said the department is pleased by the decision and "focused on upholding the accountability of those who use State and Federal funds to provide meals to children."

Last week, an internal appeals panel at the Education Department affirmed the department's decision last fall to disqualify Gar Gaar and five of its leaders from the meals programs. Berens said the nonprofit's leaders are considering whether to appeal that decision separately to the Court of Appeals.

As of now, the two actions mean Gar Gaar can't participate in federally reimbursed school year meals programs.

A month before FBI agents raided Feeding Our Future in January 2022, the Education Department rejected Gar Gaar's application to provide meals after school through the U.S. Department of Agriculture (USDA)-funded program.

In 2020, Khadija Ali started Gar Gaar, which means "help" in Somali, to help Somali and other at-risk communities with education and food assistance during the pandemic. In 2021, Gar Gaar was approved to serve meals through the USDA's separate summer meal program and received about $28 million in reimbursements for sites that served 7 million meals during three months — making it the top provider of summer meals in Minnesota in 2021.

The USDA reimburses schools, child care centers and nonprofits for feeding low-income students after school and in the summer. In Minnesota, the Education Department enforces the federal rules and disburses the money to "sponsors," like Gar Gaar, that may manage multiple food distribution sites.

When Gar Gaar sought to participate in the school year program, the Education Department denied its application, citing several reasons, including that the organization hadn't demonstrated it was financially viable.

Gar Gaar appealed the decision to an Education Department panel, which upheld the decision in February 2022. Gar Gaar took the case to the Court of Appeals the next month.

In a December hearing, Berens said the Education Department found no evidence of fraud at Gar Gaar and no one associated with the nonprofit was linked to Feeding Our Future.

The organization had "growing pains" as a newly formed nonprofit, she said then, but corrected the financial issues, submitted an extensive management plan, hired third-party auditors and accounted for every expense the Education Department questioned. She added in court documents that Gar Gaar was being confused with other sponsors "perhaps as a result of stereotyping, unconscious bias, or simply to avoid additional criticism."

Feeding Our Future, which also worked with many Somali business owners and restaurants, has accused the Education Department of discrimination.

A separate decision by the Education Department to disqualify Gar Gaar and its leaders from participating in the school year program was reversed by the department's appeals panel last May, calling it "procedurally premature." In November, the department issued a second proposed disqualification, which Gar Gaar appealed to a panel that upheld the decision last week.

That means Gar Gaar, Ali, Chief Operating Officer Priya Morioka, board member Mark Ritchie (former Minnesota Secretary of State), board member Zeynep Tuzcu and representative Mohamed Horia can't participate in the school year meals program.

"They're disappointed," Berens said. "They're still helping communities in need, but I think the way they're going to do it is likely going to have to be outside of these federal food programs."