HHS Freezes Minnesota Child Care Funds, Launches Nationwide Anti-Fraud Controls

On December 30, 2025, Jim O’Neill, Deputy Secretary of the U.S. Department of Health and Human Services, announced that all federal child care payments to Minnesota are being frozen amid allegations of long-running fraud within the state’s child care assistance programs.

According to the official HHS announcement, the action centers on concerns that hundreds of millions of taxpayer dollars distributed annually through the Administration for Children and Families (ACF) were allegedly diverted over the past decade to non-operational or fraudulent daycare providers. The freeze applies immediately and will remain in place until verification and compliance standards are met.

Three Enforcement Actions Announced by HHS

HHS outlined three specific steps designed to halt waste and tighten federal oversight nationwide:

1. Nationwide activation of the “Defend the Spend” system for all ACF payments. States must now submit documentation—including justifications, receipts, attendance records, or photo evidence—before funds are released.

   
   

2. A formal demand for a comprehensive audit from Minnesota Governor Tim Walz, covering child care centers flagged in independent investigations. Requested materials include licensing files, attendance data, inspection reports, complaints, and prior enforcement actions.

   
   

3. Launch of a dedicated fraud-reporting hotline and email portal via childcare.gov, allowing the public to submit tips directly to federal authorities.

   
   

The announcement was delivered publicly by O’Neill alongside Alex Adams, underscoring that this was an enforcement decision—not a preliminary review.

How the Issue Reached a Breaking Point

The allegations gained national attention following investigative reporting by independent journalist Nick Shirley, whose viral video documented licensed daycare locations in Minneapolis that appeared empty or inactive despite reportedly receiving significant public funding. While federal investigators were already examining broader fraud concerns, the public exposure accelerated federal action.

Minnesota has faced prior large-scale fraud scandals in social services, including a pandemic-era child nutrition case exceeding $250 million, with additional probes involving Medicaid, autism services, and housing programs. Federal agencies—including the FBI and DHS—have expanded investigative efforts tied to these matters.

Political Response and Media Coverage

Governor Walz and state officials criticized the funding freeze as politicized, warning it could disrupt legitimate providers and families. State leaders dispute some estimates of fraud scale and argue Minnesota has already increased audits and referrals to law enforcement.

Conservative commentators praised the move as overdue accountability and a clear rejection of “blank-check” governance. Major media outlets confirmed the freeze and the new federal requirements, while noting concerns about potential collateral impacts on lawful providers and emphasizing that funding may resume once documentation and compliance are verified.

Why This Matters

The Minnesota freeze reflects a broader federal shift toward verification-first spending, rooted in Trump-era oversight reforms. The “Defend the Spend” initiative marks a clear departure from automatic funding and reinforces a basic principle: public dollars require proof, transparency, and accountability.

Stopping questionable spending protects taxpayers and preserves the integrity of programs meant to serve families and children. Oversight isn’t optional—it’s the foundation of public trust.