Minnesota’s Staggering Child Care Fraud: Federal Watchdog Exposes Systematic Failure to Stop Taxpayer Theft
The federal government has caught Minnesota red-handed running a child care program so riddled with fraud that investigators found the state wasn’t even bothering to verify if children actually showed up before cutting checks to providers—a stunning admission that validates the Trump administration’s crackdown on what may be the largest welfare fraud scheme in American history.
The damning evidence comes directly from the U.S. Department of Health and Human Services, which discovered Minnesota’s child care agency had “not established adequate controls to verify the accuracy of county-issued provider payments based on attendance of children.” Translation: taxpayer money flowed freely with virtually no oversight.
A System Built for Fraud
This wasn’t mere bureaucratic sloppiness. Minnesota’s Department of Children, Youth and Families created a system where child care centers could receive funding from counties—which then billed state and federal taxpayers—”without reconciling billed hours against attendance records, even periodically.”
Read that again. Not even periodic checks. The money just flowed.
HHS Deputy Assistant Secretary Laurie Todd-Smith laid bare the complete breakdown in her official letter to Minnesota officials following a late January oversight visit. The state had “[l]imited staff and resources … to adequately pursue fraud tips and conduct proactive investigations.”
How limited? Try four investigators. Four people responsible for policing fraud across an entire state receiving nearly $185 million in federal child care funding annually.
The Biden Administration’s Convenient Rule Change
Here’s where it gets particularly interesting. The Biden administration relaxed federal “attendance-based billing” requirements in April 2024, meaning states no longer had to provide attendance records to receive reimbursement for child care expenses.
Coincidence? Hardly. This policy change effectively removed one of the few remaining guardrails against fraud, opening the floodgates for what President Trump now estimates could be as much as $19 billion in fraudulent payments to Minnesota operators.
Between 2021 and 2024, HHS funneled more than $91.8 billion through its Child Care Development Fund. With Minnesota-style “oversight,” how many billions vanished into fraudulent schemes nationwide?
Empty Daycare Centers, Full Bank Accounts
The scandal broke wide open after a viral investigation by YouTuber Nick Shirley revealed nearly a dozen Minnesota day care facilities that collected $111 million in federal funding despite having no children in attendance.
No children. $111 million.
The Trump administration immediately moved to close these loopholes, threatening to withhold Minnesota’s $184.9 million in fiscal year 2025 funding unless the state produces attendance and inspection records within 60 days.
Vice President JD Vance escalated further, freezing another $259.5 million in Medicaid funds and giving Governor Tim Walz just 60 days to implement a “corrective action plan.”
A Pattern of Negligence Stretching Back Years
Federal audits prove this isn’t a new problem—Minnesota has been running this scam for over a decade.
In fiscal year 2012, Minnesota made more than $16 million in “improper payments”—roughly one-fifth of all program dollars. State officials didn’t disqualify a single center from receiving future federal funds. They didn’t refer a single violator to law enforcement.
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. Minnesota was cited as one of only nine states exceeding a 10% threshold for improper payments.
A 2016 HHS Office of Inspector General report explicitly demanded “onsite visits” to ensure future compliance.
Minnesota ignored them.
No Training, No Accountability, No Problem
Todd-Smith’s letter revealed that “Minnesota did not demonstrate that they are currently implementing required program integrity training for providers across the state.”
The state’s version of “training”? Child care operators simply affirm they’ve read the requirements. No testing. No verification. No accountability.
Minnesota also failed to implement any “mandatory, statewide process to obtain, review and act on county level single audits” during HHS’s January oversight visit.
Every level of oversight—federal, state, and county—was systematically neutered or ignored.
Walz Faces the Music
Governor Tim Walz, who abandoned his re-election campaign in January as this scandal exploded, will testify before the House Oversight Committee this week alongside Minnesota Attorney General Keith Ellison.
The timing of Walz’s decision not to seek re-election speaks volumes. When you’re overseeing what may be the largest state-level welfare fraud operation in U.S. history, political survival becomes difficult.
The questions Walz must answer are straightforward: How did this happen? Who knew? And why did Minnesota ignore federal warnings for over a decade?
The Cost of “Compassionate” Governance
This scandal perfectly illustrates what happens when progressive governments prioritize distributing benefits over protecting taxpayers. Minnesota Democrats created a system designed to move money quickly with minimal “barriers”—bureaucrat-speak for basic fraud prevention.
The result? Potentially billions in taxpayer theft, ghost day care centers collecting massive checks, and four—count them, four—investigators responsible for preventing fraud across an entire state.
Minnesota’s child care program became a ATM for fraudsters, and state officials either didn’t care or actively facilitated the theft through willful negligence.
Accountability at Last
The Trump administration’s aggressive response represents a fundamental shift in how Washington addresses state-level fraud. Previous administrations issued reports, made recommendations, and watched states ignore them.
This administration is freezing funds and demanding answers.
The 60-day deadline for Minnesota to produce records and implement corrective action isn’t a suggestion—it’s an ultimatum backed by hundreds of millions in withheld funding.
For too long, states like Minnesota treated federal taxpayer money as a limitless resource to distribute without accountability. That era is over.
The question now is whether Minnesota’s fraud represents an isolated case or the tip of an iceberg. If one state could operate this brazenly for over a decade, how many others are running similar schemes?
American taxpayers deserve answers. Thanks to the Trump administration’s willingness to actually enforce federal oversight, they’re finally going to get them.
