...
By Hollie Silverman
News Editor
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Child care funding for Minnesota has been cut off by the U.S. Department of Health and Human Service (HHS) as allegations of fraud against day care in Minneapolis continue to be investigated.
HHS Deputy Secretary Jim O'Neill made the announcement on X Tuesday, outlining steps the department has taken, including videos of alleged perpetrators.
"We have frozen all child care payments to the state of Minnesota," O'Neill said in the post. "Today we have taken three actions against the blatant fraud that appears to be rampant in Minnesota and across the country."
Read More on News
Those steps include mandating Administration for Children and Families (ACF) payment receipts and photo evidence before states receive money, ordering an audit by Democratic Governor Tim Walz's office of the child care centers in question and launching a hotline dedicated to reporting fraud claims of this nature.
"We have turned off the money spigot and we are finding the fraud," he concluded in the X post.
Walz said in a post on X Tuesday, "We’ve spent years cracking down on fraud - referring cases to law enforcement, shutting down and auditing high-risk programs. Trump keeps letting fraudsters out of prison. To the national news just now paying attention, here’s what we’ve done to stop it."
Newsweek reached out to Walz via email Tuesday night for further comment.
Why It Matters
The announcement comes after federal prosecutors said more than 60 people have been convicted of fraud in the state of Minnesota, with more than 90 charged. Estimates of the cost to taxpayers are $250 million to $1 billion, while investigations by state and federal officials remain ongoing.
A federal prosecutor said earlier in December that $9 billion or more in federal funds allocated to 14 state-run programs since 2018 may have been stolen.
Walz and other officials have disputed the amount but acknowledge the scale of the issue and say they're determined to solve it. Many of the defendants are of East African descent and believed to be part of Minnesota's Somali immigrant community, the largest of its kind in the United States.
...
What to Know About the Viral Video on Minnesota's Day Care Centers
A 42-minute video posted by independent journalist Nick Shirley went viral in late December, racking up more than 100 million views on X.
Shirley visited multiple Minnesota day care facilities—including the Quality Learning Center in South Minneapolis—which had received significant state funds but appeared dormant in his footage.
At the center, Shirley captured what appeared to be a receipt for $1.9 million in state payments despite the center looking inactive and displaying a sign with "Learning" incorrectly spelled as “Learing.”
Shirley's reporting intensified calls for investigation and played a pivotal role in prompting federal scrutiny. Some of his claims, including payment records, could not be independently verified by Newsweek, and staff at the center later said Shirley had visited outside of regular hours while state officials said follow-up inspections were ongoing.
Minnesota's COVID-19 Fraud Investigation: A Complete Explainer
The spotlight on Minnesota's day care industry comes after a series of fraud cases involving federal COVID-19 relief programs.
Authorities have charged dozens in what federal agencies describe as large-scale racketeering and money laundering, notably the Feeding Our Future nonprofit scheme, which resulted in $250 million in stolen funds.
The U.S. Small Business Administration (SBA), led by Administrator Kelly Loeffler, said it had found 13,600 potentially fraudulent Paycheck Protection Program loans totaling $430 million in the state, and cited a $1 billion pandemic fraud network. Both the Department of Homeland Security (DHS) and FBI have increased personnel and resources dedicated to rooting out government program abuses in Minnesota.
What to Know About Minnesota's Somali Population
Minnesota is home to the largest Somali community in the United States, predominantly centered in the Twin Cities area.
Federal investigations noted a significant number of those charged in state and federal fraud cases are Somali Americans, sparking tension around community representation and racial profiling concerns.
President Donald Trump has publicly criticized Minnesota's handling of safety-net programs, frequently referencing the state's Somali population.
Advocacy groups have expressed concern about broad community stigma and have urged authorities to distinguish between individuals charged with crimes and the wider Somali American population.
U.S. Department of Health and Human Services Pauses Payments to Minnesota's Day Care Centers
O’Neill announced that all child care payments to Minnesota had been frozen Tuesday.
In a post on X, he cited "serious allegations that the state of Minnesota has funneled millions of taxpayer dollars to fraudulent daycares across Minnesota over the past decade," and promised a trio of federal actions to address the issue.
DHS and the FBI also launched sweeping investigations, with DHS agents conducting door-to-door checks at suspected sites and the SBA freezing $5.5 million in annual funding to the state.
Walz has faced mounting criticism but has defended his administration's fraud response by hiring outside auditors and launching new oversight roles.
What People Are Saying
O'Neill, in a post on X Tuesday: "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 against the blatant fraud that appears to be rampant in Minnesota and across the country: 1. I have activated our defend the spend system for all ACF payments. Starting today, all ACF payments across America will require a justification and a receipt or photo evidence before we send money to a state. 2. Alex Adams and I have identified the individuals in @nickshirleyy's excellent work. I have demanded from @GovTimWalz a comprehensive audit of these centers. This includes attendance records, licenses, complaints, investigations, and inspections. 3. We have launched a dedicated fraud-reporting hotline and email address at https://childcare.gov Whether you are a parent, provider, or member of the general public, we want to hear from you."
Walz, also in a post on X Tuesday: "We’ve spent years cracking down on fraud - referring cases to law enforcement, shutting down and auditing high-risk programs. Trump keeps letting fraudsters out of prison. To the national news just now paying attention, here’s what we’ve done to stop it...My message remains clear: If you threaten everything that makes our state a great place to live by committing fraud in Minnesota, you will be caught and prosecuted to the fullest extent of the law."
FBI Director Kash Patel, on X: "To date, the FBI dismantled a $250 million fraud scheme that stole federal food aid meant for vulnerable children during COVID. The investigation exposed sham vendors, shell companies, and large-scale money laundering tied to the Feeding Our Future network. The FBI believes this is just the tip of a very large iceberg. We will continue to follow the money and protect children, and this investigation very much remains ongoing."
What Happens Next
The FBI has said it will continue searching for fraud in Minnesota, with federal and state authorities conducting ongoing program reviews and increased oversight at child care centers.
Congressional House Oversight investigations have expanded, and several state audits are underway. Federal and state officials have pledged further enforcement actions, but the long-term effect on Minnesota's early childhood programs and the broader Somali community's reputation remains undetermined.
Update 12/30/25, 6:34 p.m. ET: This article has been updated with more information.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines