Trump admin halts Minnesota childcare payments amid fraud investigation

All child care payments to Minnesota were frozen Tuesday evening as the Trump administration investigates alleged fraud by organizations in the state, Health and Human Services deputy secretary Jim O'Neill announced. Why it matters: The Trump administration has repeatedly portrayed Minnesota as a propagator of fraud, particularly placing blame on the state's large Somali community. The expanded investigation into Minnesota's daycare centers follows allegations from MAGA-aligned YouTuber Nick Shirley, who claimed widespread fraud in the state's government-funded child care programs during Christmas week — prompting responses from the FBI and Vice President Vance. Driving the news: O'Neill on X said that beginning Tuesday, all payments routed through the Administration for Children and Families (ACF) will "require a justification and a receipt or photo evidence" before states can receive funding. O'Neill added that he and ACF assistant secretary Alex Adams have identified the child care centers highlighted in Shirley's posts and are demanding Minnesota Gov. Tim Walz provide detailed records, including "attendance records, licenses, complaints, investigations, and inspections." He also revealed the creation of a dedicated fraud-reporting hotline and email address for members of the public to use. The other side: Walz said Tuesday evening the state has worked to eliminate fraud for years, including "referring cases to law enforcement, shutting down and auditing high-risk programs.""This is Trump's long game," Walz wrote on X. "We've spent years cracking down on fraudsters."It's a serious issue — but this has been his plan all along," he added. "He's politicizing the issue to defund programs that help Minnesotans."State of play: Minnesota's child care programs have previously been investigated for fraud, dating to 2019. Federal prosecutors deemed the "Feeding Our Future" case in Minnesota the nation's largest-ever case of pandemic aid fraud. Another investigation was launched into a housing stabilization program, which reportedly helped seniors and those with disabilities move into homes, but the program shut down in 2025 after it was deemed "extremely vulnerable to fraud."Assistant U.S. Attorney Joe Thompson said in December that he believes at least $9 billion in federal funds supporting 14 Minnesota-run programs since 2018 may have been stolen.Representatives for the Department of Health and Human Services did not immediately respond to Axios' Tuesday evening request for comment.The bottom line: O'Neill's decision to freeze child care payments could have sweeping consequences for child care centers that are not implicated in fraud. Go deeper: FBI, DHS escalate Minnesota crackdown. Here's everything you need to know