Trump Administration Freezes All Federal Child Care Payments to Minnesota Over Alleged Widespread Daycare Fraud
In a dramatic escalation of federal scrutiny on alleged fraud in Minnesota’s social services programs, the U.S. Department of Health and Human Services (HHS) announced on December 30, 2025, that it has frozen all federal child care payments to the state. The move, announced by Deputy HHS Secretary Jim O’Neill, comes amid explosive allegations sparked by a viral YouTube video from independent journalist Nick Shirley, which claims to expose non-operational daycare centers receiving millions in taxpayer funds.
HHS officials stated the freeze affects funding from the Administration for Children and Families (ACF), which provides Minnesota with approximately $185 million annually in child care support. O’Neill declared in a video and X post: “We have turned off the money spigot and we are finding the fraud.”
Triggered by Viral Video and Long-Standing Probes
The action follows a highly viewed video posted by YouTuber Nick Shirley on December 26, 2025, titled “I Investigated Minnesota’s Billion Dollar Fraud Scandal.” In the roughly 40-minute footage, Shirley visits multiple licensed daycare centers in Minneapolis—many reportedly Somali-run—showing them appearing empty or inactive during business hours, despite records indicating they received substantial payments through Minnesota’s Child Care Assistance Program (CCAP). One highlighted center, the “Quality Learing Center” (noting the misspelled sign), allegedly received nearly $4 million total, including $1.9 million in 2025.
Shirley’s claims build on years of federal investigations into Minnesota fraud, including the notorious Feeding Our Future scandal—a $250 million COVID-era child nutrition fraud scheme that led to over 90 charges, dozens of convictions (mostly involving Somali Americans), and millions recovered. Federal prosecutors have suggested broader fraud across 14 state-run programs could exceed $9 billion since 2018, though this figure is disputed.
FBI Director Kash Patel confirmed the bureau had already “surged” resources to Minnesota before the video went viral, describing past cases as “just the tip of a very large iceberg.” DHS agents were seen conducting door-to-door visits in Minneapolis following the footage.
HHS’s Sweeping Nationwide Measures
In response, HHS implemented three immediate actions:
- Complete freeze on all child care payments to Minnesota.
- Nationwide requirement for future ACF payments: States must provide justification, receipts, or photo evidence before funds are disbursed.
- Demand for audit from Minnesota Gov. Tim Walz, including attendance records, licenses, complaints, investigations, and inspections of centers featured in Shirley’s video.
- Launch of a fraud reporting hotline and email for tips from parents, providers, and the public.
O’Neill emphasized the moves target “blatant fraud that appears to be rampant in Minnesota and across the country.”
State Response and Context
As of December 31, 2025, Gov. Tim Walz’s office and the Minnesota Department of Children, Youth, and Families have not issued a direct public comment on the freeze. Walz has previously defended his administration’s efforts, noting increased oversight, a new program integrity director, and cooperation with federal partners. State officials have disputed the scale of fraud and pointed out that centers in Shirley’s video were licensed, recently inspected (some as late as December 4, 2025), and had no confirmed fraud findings—though some faced safety and compliance violations.
Critics, including conservative outlets and figures like Rep. Tom Emmer, have accused the state of lax oversight under Walz. The controversy has fueled political tensions, with President Trump and allies highlighting fraud in Minnesota’s Somali community.
The freeze’s full impact on families, providers, and children remains unclear, with the situation developing rapidly. An independent audit ordered by Walz is expected in early 2026.
Stay tuned for updates as more details emerge from federal investigations and state responses.
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