On Tuesday, December 30th, the U.S. Department of Health and Human Services (HHS) announced the suspension of all child care payments to the state of Minnesota. Currently, the federal government is conducting a comprehensive fraud investigation into the state’s social service programs.
HHS Deputy Secretary Jim O’Neill released a video on social media platform X on Tuesday, providing detailed information on the investigation into Minnesota’s daycare centers and related institutions, stating that it was necessary. He pointed out that there appears to be rampant and blatant fraud in Minnesota and across the country.
According to data from the Minnesota Department of Children, Youth, and Families, in the 2024 fiscal year, the federal government provided over $172 million in funding to the state’s child care and development fund. The department highlighted that Minnesota had allocated over $31 million towards “improving the quality and accessibility of child care” in the previous fiscal year.
O’Neill further stated that he has requested Governor Tim Walz of Minnesota to conduct an audit of the daycare centers mentioned in the self-media disclosures video, including attendance records, licenses, complaints, investigations, and inspection records.
A widely circulated video emerged on social media last week, produced by independent reporter Nick Shirley, alleging that nearly ten child care facilities and learning centers in Minneapolis may have received millions of dollars in government subsidies without actually operating.
CBS News reported on Tuesday that they visited the daycare centers mentioned by Shirley and found that, according to state records, all but two of the centers held valid licenses and all operational centers had undergone inspections by state regulatory authorities in the past six months. The investigation also revealed several violations at these daycare centers related to safety, cleanliness, equipment, and staff training, but no evidence of fraud was found.
In recent days, the federal government has intensified scrutiny on HHS programs in Minnesota, including child care programs. The Department of Homeland Security has dispatched agents to Minneapolis to investigate suspected fraudulent activities. Meanwhile, the Small Business Administration has suspended funding to Minnesota on Monday.
Attorney General Pam Bondi posted on X on Monday that lawsuits have been filed against 98 individuals as part of this large-scale investigation.
Assistant U.S. Attorney Joe Thompson stated at a press conference earlier this month that out of a total of $18 billion in bills from 14 programs under the Minnesota Department of Health since 2018, half or more may involve fraud.
This escalating scandal has put significant political pressure on Governor Walz. In October, he ordered a third-party audit of 14 services, including the closed Housing Stability Services program. Earlier this month, he appointed Tim O’Malley as the Integrity Officer to investigate the alleged fraudulent activities.
Governor Walz posted on X on Tuesday, stating that he has been actively combating fraud and transferring cases to law enforcement, closing and auditing high-risk programs.
“My message is clear: If you engage in fraud in Minnesota, threatening everything that makes our state a livable place, you will be caught and face legal consequences,” he wrote.