HHS Halts Minnesota Child Care Payments Amid Fraud Claims

The Trump administration has frozen federal child care payments to Minnesota, citing allegations of widespread fraud involving Somali-run providers in the state that have gone viral online.

Health and Human Services Deputy Secretary Jim O'Neill announced the move Tuesday on X, saying the freeze is part of a broader crackdown on what he described as rampant fraud in child care funding and a failure of oversight by state officials.

The allegations gained national attention following an investigation by independent journalist Nick Shirley, whose video has surpassed 2.2 million views on YouTube and more than 127 million views on X as of Tuesday night.

"You have probably read the serious allegations that the state of Minnesota has funneled millions of taxpayer dollars to fraudulent day cares across Minnesota over the past decade," O'Neill wrote.

O'Neill said HHS has taken three actions "against the blatant fraud that appears to be rampant in Minnesota and across the country."

Activated the defend-the-spend system for all Administration for Children and Families (ACF) payments. Starting immediately, all ACF payments nationwide will require justification and receipts or photo evidence before funds are released to states;
Identified the individuals highlighted in Shirley's reporting and demanded that Gov. Tim Walz provide a comprehensive audit of the child care centers involved, including attendance records, licenses, complaints, investigations, and inspections;
Launched a dedicated fraud-reporting hotline and email address at childcare.gov for parents, providers, and members of the public.

"We have turned off the money spigot, and we are finding the fraud," O'Neill wrote.

In a video linked in O'Neill's post, he and HHS Assistant Secretary Alex Adams, who oversees ACF, further discussed the allegations and the decision to halt funding.

"My office, ACF, provides Minnesota $185 million in child care funds each year," Adams said. "That money should be helping 19,000 American children, including toddlers and infants. Any dollar stolen by fraudsters is stolen from those children."

Adams said he spoke Monday with Tikki Brown, commissioner of Minnesota's Department of Children, Youth, and Families (DCYF), but received no clear assurances that the alleged fraud was limited in scope.

"She could not tell me with confidence whether those allegations of fraud are isolated or whether there's fraud stretching statewide," Adams said. "Let me be crystal clear. ACF expects every state to uphold the highest standards of oversight, monitoring, and accountability for federal dollars. Minnesota is no exception."

O'Neill said, "We're committed to holding bad actors accountable. Regardless of rank or office, anyone who's involved in perpetrating this fraud against the American people should expect to be prosecuted to the fullest extent of the law."

The funding freeze marks the latest action taken by the Trump administration against Minnesota amid escalating fraud allegations.

Earlier Tuesday, Department of Homeland Security (DHS) agents conducted searches and enforcement actions across the state targeting individuals suspected of defrauding taxpayers.

"Our investigative agents are conducting a massive operation to identify, arrest, and remove criminals who are defrauding the American people," DHS said in a post on X. "We will root out this rampant fraud plaguing Minnesota."

On Monday, the Small Business Administration (SBA) announced it had frozen more than $5.5 million in federal funding to Minnesota, citing widespread fraud and a breakdown in oversight under Walz, a Democrat.

In a letter sent to the governor last week, SBA Administrator Kelly Loeffler said the agency halted disbursements to SBA partner organizations operating in the state.

Attorney General Pam Bondi wrote Monday on X that the Department of Justice has been investigating the allegations "for months," resulting in charges against 98 individuals, 85 of Somali descent. More than 60 have been found guilty.