Additional Coverage:
Federal Child Care Funding to Minnesota Halted Amidst Fraud Allegations
St. Paul, MN – The Department of Health and Human Services (HHS) announced Tuesday an immediate freeze on all federal child care funding to Minnesota, citing widespread fraud allegations that have recently gone viral.
Deputy HHS Secretary Jim O’Neill made the announcement via a post on social media, stating that “blatant fraud … appears to be rampant in Minnesota and across the country.” He emphasized, “We have turned off the money spigot and we are finding the fraud.”
O’Neill’s decision was influenced by a video from conservative YouTuber Nick Shirley, which alleged that nearly a dozen Minnesota day care centers receiving state funds were not actually providing services. HHS has since identified these centers and demanded a “comprehensive audit” from the state. This audit is expected to scrutinize attendance records, licenses, complaints, investigations, and inspection reports.
CBS News conducted an independent review of the day care centers mentioned in Shirley’s video. State records indicate that all but two currently hold active licenses, and all active locations have undergone inspections by state regulators within the past six months. While the analysis uncovered numerous citations for issues such as safety and cleanliness, no direct evidence of fraud was recorded.
Several of the day care centers featured in Shirley’s video have refuted the fraud claims. ABC Learning Center, one of the facilities, provided CBS News with surveillance footage showing parents dropping off children on the very day Shirley’s visit was alleged to have occurred.
A spokesperson for Minnesota Governor Tim Walz released a statement, saying, “The governor has been combating fraud for years while the President has been letting fraudsters out of jail. Fraud is a serious issue. But this is a transparent attempt to politicize the issue to hurt Minnesotans and defund government programs that help people.”
Effective immediately, O’Neill stated that all payments from HHS’s Administration for Children and Families (ACF) nationwide will now require “a justification and a receipt or photo evidence before we send money to a state.”
According to Alex Adams, head of the ACF, Minnesota typically receives approximately $185 million in child care funds annually from the agency. The state’s Child Care Assistance Program, which provides subsidies for roughly 23,000 children from low-income families, relies on hundreds of millions in federal dollars each year. For the current fiscal year ending September 2026, the federal contribution was projected to be $218 million, with an additional $155 million from the state.
This move by O’Neill follows a series of actions, including visits by Department of Homeland Security agents to dozens of Minneapolis sites just a day prior. DHS Secretary Kristi Noem characterized these visits as part of a “massive investigation on child care and other rampant fraud.”
In recent years, Minnesota has faced a number of alleged fraud schemes targeting its public assistance programs. Federal prosecutors have secured convictions for dozens of individuals involved in a nearly $250 million scheme to defraud a federally backed child nutrition program during the pandemic. Additionally, individuals have been charged with defrauding Medicaid-supported autism services and housing stabilization programs.
Federal prosecutors have estimated that fraudulent payments made by Minnesota’s Medicaid service could exceed $9 billion, a figure that Governor Walz has contested. The fraud issues have also garnered attention from President Trump, who has highlighted the fact that many – though not all – of the defendants involved are of Somali descent.
Governor Walz has defended the state’s handling of the situation while simultaneously vowing to intensify efforts to combat fraud.