The Department of Health and Human Services said Tuesday it has frozen federal funding for child care in Minnesota, citing virus fraud allegations.
Deputy Health Minister Jim O'Neill announced the move in publish on Xwriting that “outright fraud… appears to be rampant in Minnesota and across the country.”
“We have turned off the money tap and are discovering fraud,” he wrote.
O'Neill cited a video in which conservative YouTuber Nick Shirley argues that about a dozen Minnesota day care centers that receive public funds don't actually provide services. O'Neill said the agency identified the centers mentioned in the video and required the state to conduct a “due diligence review” of them, including “visitation, licensing, complaint, investigation and inspection reports.”
CBS News conducted my own analysis the kindergartens Shirley mentioned. All but two have valid licenses, and all operating facilities have been visited by state regulators within the past six months, according to state records. The analysis found dozens of mentions of safety, cleanliness and other concerns, but no evidence of fraud.
Some daycare centers featured in Shirley's video have spoken out against the fraud allegations. One of the institutions, ABC Learning Center, shared surveillance video with CBS News that showed parents dropping off their children the same day Shirley arrived.
Minnesota Governor Tim Walz replied on social networksstating: “This is Trump’s long game. We've spent years fighting scammers. It's a serious problem, but it was his plan all along. He is politicizing the issue to protect programs that help Minnesotans.”
Starting now, all payments from the HHS Administration for Children and Families nationwide “will require justification and a receipt or photographic evidence before we send the money to the state,” O'Neill said.
The Administration for Children and Families sends about $185 million in child care funds to Minnesota each year, agency chief Alex Adams said. video courtesy of HHS.
Minnesota receives hundreds of millions federal dollars per year to support its Child Care Assistance program, which subsidizes day care services for approximately 23,000 children from low-income families. In the current fiscal year ending September 2026, the federal government's share of the program is expected to be $218 million, with the state receiving $155 million, according to government forecasts.
O'Neill's actions came the day after Department of Homeland Security agents visited dozens of properties in MinneapolisIt's part of what Homeland Security Secretary Kristi Noem has called a “massive investigation into child abuse and other rampant fraud.”
In recent years Minnesota faced with a number of alleged fraud schemes targeted at state public assistance programs. Dozens of people have been convicted in a scheme to steal nearly $250 million from a federally supported child nutrition program during the pandemic, and federal prosecutors have charged people with defrauding Medicaid-backed autism services and housing stabilization programs.
Federal prosecutors have calculated that it was fraudulent Minnesota Medicaid payments in recent years could be $9 billion or more, a figure Waltz disputed.
The fraud issues have caught the attention of President Trump, who has focused on the fact that many — though not all — of the defendants are of Somali descent.
Walz defended the state's handling of the situation but vowed to crack down on fraud.
