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Federal government freezes Minnesota child care funding amid fraud investigation

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Published  December 30, 2025 6:25pm CST
Fraud in Minnesota
FOX 9
Government freezes Minnesota day care funding amid fraud investigation

Government freezes Minnesota day care funding amid fraud investigation

Several Minnesota child care centers have come to the forefront of a massive fraud investigation. Tuesday night, the federal government stepped in, freezing funds to the state.

The Brief

    • The U.S. Department of Health and Human Services is freezing child care payments to Minnesota amid an ongoing fraud investigation.
    • Nick Shirley, who reportedly uncovered more than $100 million in fraud at 10 different facilities, was back in Minneapolis on Tuesday.
    • The Minnesota Department of Children, Youth and Families has launched its own investigation, and so far has not found evidence of fraud.

MINNEAPOLIS (FOX 9) - Several Minnesota child care centers have come to the forefront of a massive fraud investigation.

Tuesday night, the federal government stepped in.

Child care payments frozen

What we know:

The U.S. Department of Health and Human Services announced it has frozen all child care payments to Minnesota amid the ongoing investigation and allegations of fraud. That equates to about $185 million per year.

Deputy Secretary Jim O’Neill announced three actions to combat the fraud:

  • The "Defend the Spend" system for all ACF payments has been activated. Starting Tuesday, all ACF payments across America will require a justification and a receipt or photo evidence before money is sent to a state.
  • HHS has demanded from the Office of Gov. Tim Walz a comprehensive audit of the child care centers under investigation It includes attendance records, licenses, complaints, investigations and inspections.
  • A dedicated fraud-reporting hotline and email address has been launched at https://childcare.gov. Whether you are a parent, provider, or member of the general public, the government wants to hear from you.

Governor Tim Walz responds

The other side:

Minnesota Governor Tim Walz responded to O'Neill's announcement Tuesday night via social media:

"This is (President) Trump’s long game. We’ve spent years cracking down on fraudsters. It’s a serious issue - but this has been his plan all along. He’s politicizing the issue to defund programs that help Minnesotans."

Nick Shirley returns to Minneapolis

The backstory:

Just days after a video went viral of Nick Shirley visiting various day care centers facing accusations of fraud, he was back in the Twin Cities on Tuesday. He made appearance outside Quality Learning Center.

Shirley was accompanied by the investigator featured in his YouTube video who had pulled records on the funding for the day care centers. Shirley, wearing a misspelled Quality Learning Center sweatshirt, appeared to be working on a new video.

While FOX 9 cameras were at the day care, we saw children and staff inside the building.

Minnesota officials find no evidence of fraud

Local perspective:

State officials on Monday said they are taking a second look at several day care centers after Shirley’s video claimed to report more than $100 million in fraud at 10 day care centers.

Officials with the Department of Children, Youth and Families say those 10 facilities have been visited by the state over the last six months in standard licensing checks. Their investigation showed children were present at each of the sites during the checks, and the attendance was consistent with what was expected.

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