HHS Freezes Minnesota Child Care Funding Amid Fraud Allegations

MINNEAPOLIS, MN — The U.S. Department of Health and Human Services has frozen all federal child care payments to the state of Minnesota, citing what officials described as widespread fraud concerns within the state’s child care system.

In a statement Tuesday, Deputy Health and Human Services Secretary Jim O’Neill said the department had "turned off the money spigot" after allegations that millions of taxpayer dollars had been funneled to fraudulent day care providers over the past decade.

The decision followed the posting of a widely circulated video by conservative social media figure Nick Shirley, who alleged widespread fraud at Minnesota day care centers operated by people of Somali origin.

"We have frozen all child care payments to the state of Minnesota," O’Neill said Tuesday. "We are finding the fraud."

O’Neill announced three immediate actions. First, the department activated additional safeguards nationwide, requiring that all Administration for Children and Families payments include written justification along with receipts or photo evidence before funds are released.

Second, O’Neill said he formally demanded a comprehensive audit from Minnesota Gov. Tim Walz.

The requested review includes attendance records, licensing documents, complaints, inspections, and past investigations tied to child care centers across the state.

Third, HHS launched a new fraud reporting hotline and email system through ChildCare.gov, encouraging parents, providers, and members of the public to submit tips.

The funding freeze affects a federal child care aid stream that provides roughly $185 million annually to Minnesota, The New York Times reported.

Gov. Tim Walz’s office responded by saying the state has been working to address fraud for years while criticizing the federal action as politically motivated. A spokesperson for the governor said Minnesota has made progress but acknowledged additional reforms are needed.

Minnesota has faced scrutiny over major fraud schemes in recent years beyond child care.

Federal authorities have pursued one of the largest pandemic-era fraud cases in the country tied to Feeding Our Future, a nonprofit that falsely claimed to distribute federally funded meals to children but instead diverted millions in taxpayer funds.

Federal prosecutors said the scheme involved numerous fraudulent sites and led to dozens of indictments and convictions for wire fraud, money laundering, and related charges as part of the roughly $300 million fraud case.

Patch has been reporting on the Feeding Our Future case since the time charges were first filed in 2022.

Earlier this fall, Patch reported on how prosecutors said a Minneapolis woman recruited families to join a fake autism therapy program that prosecutors say defrauded taxpayers out of $14 million.

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