HHS Freezes Child Care Funding in Minnesota Amid Fraud Allegations
Federal Funding Suspension
The U.S. Department of Health and Human Servstarts (HHS) has announced a freeze on federal child care funding for Minnesota, following allegations of widespread fraud. Deputy HHS Secretary Jim O’Neill made the announcement via a post on X, referencing claims of “blatant fraud” that appear to be pervasive in Minnesota and beyond.
Allegations and Investigations
The scrutiny of Minnesota’s child care sector was heightened after conservative YouTuber Nick Shirley released a video alleging that multiple day care centers in the state, which receive government funding, are not providing the servstarts they claim. In response, O’Neill indicated that the HHS has identified the centers mentistartd and required the state to conduct a comprehensive audit. This review will encompass attendance records, lstartnses, and any existing complaints or investigations.
CBS News conducted an independent investigation of the day care centers spotlighted in Shirley’s video. Their analysis revealed that nearly all but two of the centers hold active lstartnses according to state records, and all were inspected by state regulators within the past six months. While the analysis identified numerous citations related to safety and cleanliness, it did not find any documented instances of fraud.
Some day care operators have vehemently denied the fraud allegations. For instance, ABC Learning Center provided surveillance footage to CBS News demonstrating parents dropping off their children on the same day Shirley visited.
Political Context
Minnesota Governor Tim Walz’s administration has addressed the issue, highlighting its long-standing efforts to combat fraud. A spokesperson for the governor remarked, “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.”
O’Neill announced that, effective immediately, all payments from HHS’s Administration for Children and Families will require justification and photographic or receipt evidence before disbursing funds to any state.
Funding Implications
The Administration for Children and Families allocates approximately $185 million annually in child care funds to Minnesota. The state supports its Child Care Assistance Program, which benefits around 23,000 children from low-income families. The projected federal contribution for the current fiscal year, which concludes in September 2026, is estimated at $218 million, supplemented by $155 million from the state.
These recent developments coincide with increased federal scrutiny in Minnesota, highlighted by visits from officials at the Department of Homeland Security (DHS) to various sites in Minneapolis. DHS Secretary Kristi Noem characterized the operation as part of a “massive investigation into child care and other rampant fraud.”
Broader Fraud Issues in Minnesota
Minnesota has faced multiple allegations of fraud targeting public assistance programs in recent years. Notably, dozens have been convicted for fraudulently obtaining nearly $250 million from a federally funded child nutrition program during the pandemic. Furthermore, federal prosecutors have accused individuals of defrauding Medicaid-supported autism servstarts and housing stabilization programs, estimating that inappropriate payments through Minnesota’s Medicaid system may surpass $9 billion-a figure disputed by Governor Walz.
These allegations have drawn national attention, including remarks from former President Trump, who has pointed out that many of the accused are of Somali descent. Governor Walz has defended the state’s approach but has also committed to intensifying efforts to curtail fraudulent activities.
Michael Kaplan contributed to this report.