HHS has frozen all federal child care payments to Minnesota, citing fraud allegations tied to a viral video and demanding a full audit of centers receiving funds.
Deputy HHS Secretary Jim O’Neill announced the freeze Dec. 30 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,” Mr. O’Neill said. “Funds will be released only when states prove they are being spent legitimately.”
The move comes after a 42-minute video from YouTuber Nick Shirley alleged that nearly a dozen Minnesota day care centers receiving public funding were not actually providing services. CBS News reviewed the centers named and found that all but two had active licenses, and all active locations had been inspected by state regulators within the last six months. The review uncovered citations for cleanliness and safety issues, but no confirmed evidence of fraud.
Mr. O’Neill said the agency has identified the centers mentioned in the video and is demanding a “comprehensive audit,” including attendance records, licenses, complaints, investigations and inspections.
As part of the response, HHS launched a fraud-reporting hotline and activated a “defend the spend” system, which will now require all payments from the Administration for Children and Families to include receipts or photo evidence before money is sent to any state.
“This is Trump’s long game,” Minnesota Gov. Tim Walz said in a Dec. 30 post on X. “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.”
Since 2022, the Justice Department has charged dozens of individuals in connection with alleged fraud involving programs administered by Minnesota HHS. The charges involve schemes to defraud federally funded programs, including Medicaid, according to The Hill. At a press conference on Dec. 18, Assistant U.S. Attorney Joseph Thompson said it’s possible that “half or more” of the $18 billion billed to 14 MDHS programs since 2018 could be fraudulent.
Minnesota’s Child Care Assistance Program supports care for about 23,000 children from low-income families. In the current fiscal year, federal funding was projected at $218 million, with $155 million coming from the state, according to its website.
The governor’s office did not respond to Becker’s request for comment.
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