HHS Freezes Federal Child Care Payments to Minnesota Over Fraud Claims

The Department of Health and Human Services said on Tuesday that it is freezing federal child care funding for Minnesota after a viral video alleged fraud at day care centers there, CBS News and NBC News reported.

Deputy HHS Secretary Jim O’Neill announced the move on X, writing that “blatant fraud ... appears to be rampant in Minnesota and across the country” and “we have turned off the money spigot and we are finding the fraud.” He cited a video by a conservative YouTuber that alleged nearly a dozen state-funded day care centers are not providing services. O’Neill said the agency had identified the centers and demanded a “comprehensive audit” of them, including attendance records, licenses, complaints and inspections, CBS News reported.

O’Neill also announced a nationwide change. Payments from HHS’s Administration for Children and Families “will require a justification and a receipt or photo evidence before we send money to a state,” he said, according to CBS News and NBC News. NBC News reported that in a follow-up post he said funds will be released “only when states prove they are being spent legitimately.” Alex Adams, the agency head, said the agency sends Minnesota about $185 million in child care funds a year; HHS did not say how much of that is frozen, NBC News reported.

CBS News said it conducted its own analysis of the centers in the YouTuber’s video. All but two had active licenses, according to state records, and all active locations had been visited by state regulators in the past six months. The analysis found dozens of citations for safety, cleanliness and other issues, but no recorded evidence of fraud. One center, ABC Learning Center, gave CBS News surveillance video showing parents dropping off children on the day of the YouTuber’s visit.

Minnesota officials objected. Gov. Tim Walz, the 2024 Democratic vice presidential nominee, wrote: “This is Trump’s long game. We’ve spent years cracking down on fraudsters,” and accused the administration of politicizing the issue to defund programs that help Minnesotans. According to CBS News, Attorney General Keith Ellison said, “fraud is unacceptable and individuals responsible for it should be prosecuted,” while criticizing the federal action as a threat to child care services that Minnesota families rely on.

Minnesota has dealt with a series of fraud cases. Federal prosecutors announced indictments in 2022 over an alleged $250 million scheme to defraud a federally funded child nutrition program, and as of November had charged 77 people, NBC News reported; CBS News said dozens have been convicted in the scheme, which it described as stealing nearly $250 million during the pandemic.

NBC News reported that FBI Director Kash Patel said on Sunday that the bureau had “surged” resources to Minnesota to investigate fraud claims, and that those steps predated the viral video. White House press secretary Karoline Leavitt called the investigation “a top priority for the administration,” NBC News reported, and Vice President JD Vance praised the payment halt as “one of the most important steps we can take to end the fraud in Minnesota.”