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The U.S. Department of Health and Human Services (HHS) has frozen all federal child care payments to Minnesota and imposed new verification requirements nationwide, citing allegations of rampant fraud in the state’s childcare programs.
Deputy HHS Secretary Jim O’Neill announced the measures in a post on X (formerly Twitter) on December 30, 2025, stating: “We have frozen all child care payments to the state of Minnesota.”
O’Neill referenced “serious allegations that the state of Minnesota has funneled millions of taxpayer dollars to fraudulent daycares across Minnesota over the past decade” and described the fraud as “blatant” and potentially widespread across the country.
We have frozen all child care payments to the state of Minnesota.
You have probably read the serious allegations that the state of Minnesota has funneled millions of taxpayer dollars to fraudulent daycares across Minnesota over the past decade.
Today we have taken three actions… pic.twitter.com/VYbyf3WGop
— Deputy Secretary Jim O’Neill (@HHS_Jim) December 30, 2025
The decision follows a viral video investigation by independent journalist Nick Shirley, which highlighted several daycare centers in Minneapolis, many reportedly Somali-run, that appeared empty or non-operational despite receiving substantial public funding.
Read more about it here.
O’Neill praised Shirley’s “excellent work” in identifying specific centers.
HHS outlined three immediate actions:
- Activation of the “defend the spend” system for all payments from the Administration for Children and Families (ACF), requiring states to provide justifications, receipts, or photo evidence before funds are released.
- A demand sent to Minnesota Governor Tim Walz for a comprehensive audit of the centers featured in Shirley’s video, including attendance records, licenses, complaints, investigations, and inspections.
- The launch of a dedicated fraud-reporting hotline and email for tips from parents, providers, or the public.
Meanwhile, Assistant Secretary for Family Support Alex Adams noted that ACF provides Minnesota with approximately $185 million annually in child care funds, supporting subsidies for low-income families.
Millions affected of freeze
The freeze affects hundreds of millions in federal dollars for Minnesota’s Child Care Assistance Program and has raised concerns about impacts on legitimate providers and families.
Some childcare centers not suspected of fraud may face delays, though HHS stated funds will be released upon verification of legitimate spending.
Minnesota Governor Tim Walz responded on X, calling the move politicized.
“This is Trump’s long game. We’ve spent years cracking down on fraudsters. It’s a serious issue — but this has been his plan all along. He’s politicizing the issue to defund programs that help Minnesotans,” Walz said in a repost.
Walz’s office emphasized prior efforts, including audits, program shutdowns, and referrals to law enforcement.
This is Trump’s long game.
We’ve spent years cracking down on fraudsters. It’s a serious issue – but this has been his plan all along.
He’s politicizing the issue to defund programs that help Minnesotans. https://t.co/7ByWjeXxu0
— Governor Tim Walz (@GovTimWalz) December 31, 2025
The actions come amid broader federal scrutiny of Minnesota’s social services, including ongoing investigations into COVID-era fraud schemes estimated in the billions. While past prosecutions have occurred for overbilling, authorities have not yet charged the specific centers in Shirley’s video with fraud.
