The US Department of Health and Human Services found Minnesota’s child care agency failed to adequately verify attendance records or “pursue fraud tips” following an oversight visit in late January, according to a letter obtained by The Post.
HHS’ Administration for Children and Families informed Minnesota officials that its handling of the distribution of federal taxpayer dollars for child care in the state had “not established adequate controls to verify the accuracy of county-issued provider payments based on attendance of children.”
As a result, child care centers could get funding from counties — and counties could then bill the state and the federal government by extension — “without reconciling billed hours against attendance records, even periodically.”
Minnesota’s Department of Children, Youth and Families also had “[l]imited staff and resources … to adequately pursue fraud tips and conduct proactive investigations,” Laurie Todd-Smith, HHS ACF deputy assistant secretary for early childhood development, wrote in the letter.
Just four investigators are working for Minnesota’s Child Care Assistance Program to address all potential fraud.
Additionally, Todd-Smith said, “Minnesota did not demonstrate that they are currently implementing required program integrity training for providers across the state,” meaning all child care center operators have to do is affirm they’ve read requirements to receive funding.
And Todd-Smith told Minnesota DCYF Commissioner Tikki Brown that HHS observed no “mandatory, statewide process to obtain, review and act on county level single audits” during their Jan. 22-23 oversight visit.
President Trump has claimed as much as $19 billion in federal funds may have been taken by Minnesota fraudsters, as his administration seeks to crack down on “loopholes” that allowed for taxpayer “waste, fraud and abuse.”
The Trump administration’s focus followed a viral video from YouTuber Nick Shirley that alleged nearly a dozen day cares in the state had taken $111 million in federal funding — but seemingly had no children in attendance.
Minnesota youth services got $184,928,081 in taxpayer funding in fiscal year 2025 that HHS officials also warned in a Jan. 15 letter could be withheld if the state’s Department of Children, Youth and Families didn’t hand over attendance and inspection records in 60 days.
The Biden administration had previously relaxed a federal rule for “attendance-based billing” in April 2024, meaning that states no longer had to provide the records in order to be reimbursed for child care expenses.
In total, HHS ACF provided more than $91.8 billion between 2021 and 2024 from its Child Care Development Fund (CCDF), one of the largest federal block grant programs, which provides taxpayer money for child care in states, US territories and tribes, departmental data show.
Vice President JD Vance announced last Wednesday that the Trump administration would also be withholding another $259.5 million in Medicaid funds, citing fraud concerns — and gave Minnesota Gov. Tim Walz only 60 days to impose a “corrective action plan.”
Walz — who bowed out of his re-election race for governor in January — will appear this week on Capitol Hill with Minnesota Attorney General Keith Ellison for a hearing with the House Oversight Committee to answer questions about the fraud scandal.
Past federal watchdog audits have already uncovered tens of millions of dollars in erroneous payments to child care centers in the state.
In fiscal year 2012, Minnesota made more than $16 million in “improper payments” — around one-fifth of all program dollars — but state officials didn’t disqualify any centers from getting future federal funds or refer violators to law enforcement, according to an HHS Office of Inspector General report.
State officials also never “[c]hecked for multiple providers that are billing for the same child at the same time” or conducted “on site” visits to centers, per the HHS OIG report.
The audit cited Minnesota as one of only nine states that exceeded a 10% threshold for the improper payments.
At the time of the 2016 report, HHS OIG demanded “onsite visits” to ensure future compliance.
Reps for Minnesota DCYF did not immediately respond to a request for comment.
