The Department of Health and Human Services said Tuesday it has frozen federal child care funding for the state of Minnesota, citing viral fraud allegations.
Deputy HHS Secretary Jim O’Neill announced the move in a post on X, writing that “blatant fraud … appears to be rampant in Minnesota and across the country.”
“We have turned off the money spigot and we are finding the fraud,” he wrote.
O’Neill cited a video in which conservative YouTuber Nick Shirley alleged nearly a dozen Minnesota day care centers that receive state funds aren’t actually providing services. O’Neill said the agency has identified the centers mentioned in a video and demanded that the state carry out a “comprehensive audit” of them, including “attendance records, licenses, complaints, investigations and inspections.”
CBS News conducted its own analysis of day care centers mentioned by Shirley. All but two have active licenses, according to state records, and all active locations were visited by state regulators within the last six months. The analysis found dozens of citations for safety, cleanliness and other issues, but no recorded evidence of fraud.
A spokesperson for Minnesota Gov. Tim Walz said in a statement: “The governor has been combatting 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.”
Starting immediately, O’Neill said, all payments from HHS’s Administration for Children and Families nationwide “will require a justification and a receipt or photo evidence before we send money to a state.”
The Administration for Children and Families sends some $185 million in child care funds to Minnesota annually, the agency’s head, Alex Adams, said in a video shared by HHS.
Minnesota receives hundreds of millions of federal dollars per year to support its Child Care Assistance Program, which subsidizes day care services for roughly 23,000 children from low-income families. In the current fiscal year ending in September 2026, the federal government’s share of the program was expected to total $218 million, with the state kicking in $155 million, according to state projections.
The moves by O’Neill came one day after agents from the Department of Homeland Security visited dozens of sites in Minneapolis, part of what DHS Secretary Kristi Noem described as a “massive investigation on child care and other rampant fraud.”
In recent years, Minnesota has grappled with a litany of alleged fraud schemes targeting the state’s public assistance programs. Dozens of people have been convicted as part of a scheme to bilk nearly $250 million from a federally backed child nutrition program during the pandemic, and federal prosecutors have charged people with defrauding Medicaid-supported autism services and housing stabilization programs.
Federal prosecutors have estimated that fraudulent payments made by Minnesota’s Medicaid service in recent years could total $9 billion or more, a figure that Walz has disputed.
The fraud issues have drawn the attention of President Trump, who has focused on the fact that many — though not all — of the defendants are of Somali descent.
Walz has defended the state’s handling of the situation but vowed to crack down on fraud.
