Federal authorities have abruptly severed the financial lifeline to Minnesota's childcare system following explosive allegations of systemic abuse involving taxpayer money.
The Trump administration has officially halted funding to the state after reports surfaced of a sprawling scheme that may have siphoned billions in public funds intended for low-income families. Health and Human Services (HHS) officials have declared a total freeze on payments until a forensic accounting of the state's day care centres is completed.
Federal Funding Halted After Viral Video Exposes 'Ghost' Centres
The drastic measure was confirmed on Tuesday by Deputy Health and Human Services Secretary Jim O'Neill. In a statement released on X, O'Neill made it clear that the federal government would no longer tolerate the lack of oversight that allowed this situation to fester. 'We have turned off the money spigot and we are finding the fraud,' O'Neill declared, signalling a hardline stance against financial mismanagement.
The decision comes just days after national attention was drawn to the issue by YouTuber Nick Shirley. His viral investigation showcased footage of day care facilities in Minneapolis that were purportedly receiving state subsidies yet appeared to be non-operational or permanently closed. O'Neill cited this video specifically, noting that Minnesota has 'funnelled millions of taxpayer dollars to fraudulent daycares across Minnesota over the past decade.' The administration is now moving to ensure that federal cash is no longer exploitable by criminal elements.
Strict New Protocols Demand Receipts and Photographic Proof
To restore integrity to the system, the HHS has outlined three specific actions designed to stop the flow of illicit funds. The first mandates a significant tightening of documentation requirements. The US Administration for Children & Families (ACF) will now impose a requirement for 'a receipt or photo evidence' for any future payments made to states. This measure aims to create a verified paper trail that has seemingly been absent in Minnesota's disbursement process.
Furthermore, O'Neill has 'demanded' that Minnesota Governor Tim Walz immediately oversee a 'comprehensive audit' of the centres highlighted in recent reports. The federal directive requires the state to scrutinise 'attendance records, licences, complaints, investigations, and inspections'. Additionally, the department has launched a dedicated hotline and email address at childcare.gov to encourage whistleblowers to come forward. 'Whether you are a parent, provider, or member of the general public, we want to hear from you,' O'Neill stated.
🚨 MAJOR BREAKING: The Trump administration has officially FROZEN all childcare payments for Minnesota following reports of major fraud
— Nick Sortor (@nicksortor) December 30, 2025
They’ve also launched a fraud reporting portal at https://t.co/xAWDmF2b9J
Tim Walz has received a demand letter from HHS ordering a full audit… pic.twitter.com/pJc20YSqvQ
Billions in Taxpayer Funds Funnelled to Alleged Crime Ring
The scale of the alleged theft is staggering. Prosecutors have already confirmed £820 million ($1 billion) in fraudulent claims, describing a sophisticated network of deceit. According to the US Attorney's office, 92 individuals have been charged in connection with the scheme so far. Of those charged, 82 are identified as Somali immigrants.
Authorities warn that the confirmed losses may only be the tip of the iceberg. The US Attorney's office has indicated that the total amount stolen could eventually rise to as high as £7.4 billion ($9 billion). As massive fraud allegations continue to mount, the freeze on payments will remain in effect, leaving the state's human services department under intense pressure to account for years of missing money.
