HHS Freezes Federal Child Care Payments to Minnesota Amid Allegations of Widespread Fraud in Daycare and Learning Centers

The U.S. Department of Health and Human Services (HHS) has announced a complete freeze on all federal child care payments to the state of Minnesota, citing serious allegations of fraud involving daycare centers and learning centers. This decision, made public on December 30, 2025, impacts approximately $185 million in annual funding intended to support low-income families through the Child Care Assistance Program (CCAP).

Background on the Fraud Allegations

The freeze follows a viral video released by independent journalist Nick Shirley, which documented visits to several Minneapolis-area child care facilities, including daycare centers and learning centers such as Quality Learning Center and Future Leaders Early Learning Center. The video alleged that these facilities appeared empty or non-operational despite receiving millions in public funds.

Specific claims highlighted in the investigation include:

• Quality Learning Center, licensed for up to 99 children, reportedly received $1.9 million in 2025 and over $4 million total, yet appeared abandoned during visits.
• Other centers, such as Mako and Mini Child Care, were said to have collected millions while showing little to no activity.

These allegations gained traction rapidly, amplified on social media and prompting immediate federal response. HHS Deputy Secretary Jim O'Neill stated that the action addresses "blatant fraud that appears to be rampant in Minnesota," emphasizing the need to protect taxpayer dollars meant for vulnerable children.

Federal Response and Nationwide Measures

In addition to the Minnesota-specific freeze, HHS has implemented broader safeguards:

• All payments from the Administration for Children and Families (ACF) nationwide now require justification, receipts, or photo evidence.
• A dedicated fraud-reporting hotline and email have been launched for public tips.
• HHS has demanded a comprehensive audit from Minnesota Governor Tim Walz, including attendance records, licenses, complaints, investigations, and inspections for the featured centers.

Assistant Secretary Alex Adams noted that the frozen funds are intended to support around 19,000 children, stating, "Any dollars stolen by fraudsters is stolen from those children."

This move aligns with ongoing federal probes by the FBI, Department of Homeland Security (DHS), and other agencies into Minnesota's social services programs.

Impact on Daycare Centers and Learning Centers

The funding halt could significantly affect legitimate childcare providers across Minnesota, including daycare centers and learning centers serving low-income families. While the allegations target specific facilities—many of which are in Somali-American communities—state officials report that recent inspections found no confirmed fraud at the highlighted sites. However, past violations related to safety, record-keeping, and operations have been noted in some cases.

Child care advocates warn that the freeze may disrupt services for thousands of families, potentially forcing centers to close or reduce capacity if alternative funding isn't secured quickly.

Minnesota's History of Fraud Concerns

Minnesota has faced scrutiny over fraud in public assistance programs for years:

• A major $250 million pandemic-era child nutrition scam led to dozens of convictions.
• Federal estimates suggest potential billions in losses across 14 Medicaid-related programs since 2018, though state leaders dispute the figures.
• Earlier audits by the HHS Office of Inspector General and Minnesota's legislative auditor identified vulnerabilities in CCAP attendance verification and billing.

State officials, including Governor Walz, have described the federal actions as politicized, arguing that Minnesota has actively combatted fraud and that the video's claims lack verified evidence of widespread criminal activity.

What This Means for Families and Providers

Families relying on subsidized child care may face immediate challenges, while providers—particularly smaller daycare and learning centers—could experience cash flow issues. HHS emphasizes that the measures aim to ensure funds reach genuine services, with potential recovery of misused dollars.

As investigations continue, this story underscores ongoing debates about oversight in federal-state partnerships for child care. Updates will follow as more details emerge from audits and probes.

This development highlights the importance of robust fraud prevention to maintain public trust in essential programs supporting childcare across the nation.