The Trump administration has frozen all federal child care funding to Minnesota after viral allegations exposed what Deputy HHS Secretary Jim O’Neill called “blatant fraud” running rampant through the state’s taxpayer-funded daycare system.
Story Snapshot
- HHS immediately halted $218 million in annual federal child care funding to Minnesota following fraud allegations
- Conservative YouTuber Nick Shirley’s investigation exposed nearly a dozen daycare centers allegedly not providing services while collecting state funds
- Minnesota’s fraud crisis spans multiple programs with an estimated $9 billion in fraudulent Medicaid payments alone
- New nationwide requirements demand photo evidence and receipts before any federal child care payments are released
Federal Investigation Triggers Immediate Funding Freeze
Deputy HHS Secretary Jim O’Neill announced on December 30, 2025, that the Department of Health and Human Services has suspended all federal child care payments to Minnesota effective immediately. The decision followed a viral video investigation by conservative YouTuber Nick Shirley, who documented nearly a dozen Minnesota daycare centers allegedly collecting taxpayer funds without actually providing services. O’Neill stated the agency identified the facilities mentioned in Shirley’s investigation and demanded Minnesota conduct comprehensive audits of attendance records, licenses, complaints, investigations and inspections.
The Department of Health and Human Services announced on Tuesday that all child care payments to Minnesota have been frozen in response to the widespread fraud allegations under federal investigation.https://t.co/hRB8Oj2rQa
— Washington Examiner (@dcexaminer) December 31, 2025
Billions in Taxpayer Fraud Under Scrutiny
Minnesota’s Child Care Assistance Program receives hundreds of millions in federal dollars annually, with the federal government contributing $218 million and the state adding $155 million in the current fiscal year ending September 2026. The program subsidizes daycare services for approximately 23,000 children from low-income families. Federal prosecutors estimate fraudulent payments from Minnesota’s Medicaid service alone could total $9 billion or more in recent years, highlighting the massive scope of taxpayer abuse under previous leadership.
Pattern of Systemic Program Abuse
Minnesota has faced multiple high-profile fraud schemes targeting public assistance programs in recent years. Dozens of individuals were convicted for stealing nearly $250 million from a federally backed child nutrition program during the pandemic. Federal prosecutors have also charged defendants with defrauding Medicaid-supported autism services and housing stabilization programs. The Department of Homeland Security conducted visits to dozens of Minneapolis sites as part of what DHS Secretary Kristi Noem described as a “massive investigation on child care and other rampant fraud.”
Walz Deflects as Trump Administration Demands Accountability
Governor Tim Walz responded defensively on social media, claiming “This is Trump’s long game” and accusing the President of “politicizing the issue to defund programs that help Minnesotans.” However, the Trump administration’s swift action demonstrates a commitment to protecting taxpayer dollars from fraudulent schemes that flourished under previous oversight. O’Neill announced that all nationwide payments from HHS’s Administration for Children and Families will now require justification and receipt or photo evidence before funds are released to any state.
The decisive federal response sends a clear message that the era of unchecked government spending and fraudulent program abuse has ended. American taxpayers deserve accountability for their hard-earned dollars, and the Trump administration is delivering the fiscal responsibility that was absent for far too long.
