The administration of U.S. President Donald Trump has ordered an immediate freeze on federal funds allocated to childcare programs in Minnesota, citing what it describes as extensive and long-running fraud within the state’s daycare system.
The move follows mounting concerns that millions of dollars in taxpayer money were improperly paid to fraudulent providers over several years.
In a statement released on Wednesday, December 31, 2025, Deputy Secretary of Health and Human Services Jim O’Neill said the decision was prompted by evidence suggesting that the problem is not isolated to Minnesota alone, but reflects a broader national challenge in safeguarding public funds.
According to O’Neill, the federal government can no longer continue releasing money without stronger accountability measures in place.
“We have frozen all childcare payments to the state of Minnesota,” O’Neill said, noting that serious allegations indicate state systems allowed large sums of federal funds to be channeled to fake or non-compliant daycare centers.
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He added that similar risks may exist in other states, prompting the federal government to tighten oversight across the country.
Minnesota has previously faced intense scrutiny over major fraud cases, most notably the Feeding Our Future scandal, a $300 million pandemic-era scheme linked to a nonprofit that exploited federally funded programs meant to provide meals to children.
Prosecutors described the case as the largest COVID-19-related fraud in U.S. history. Investigations that began during former President Joe Biden’s administration have so far led to dozens of convictions, with more cases still under review.
In a separate development earlier this month, a federal prosecutor alleged that as much as half of the roughly $18 billion in federal funding disbursed to support 14 programs in Minnesota since 2018 may have been stolen.
Those claims further strengthened calls within the Trump administration for tougher controls on federal spending.
To address the issue, the Department of Health and Human Services has introduced new nationwide requirements for payments made through the Administration for Children and Families (ACF).
Under the new rules, all payments will require detailed justification, along with receipts or photographic proof, before funds are released.
Additionally, the department has launched a dedicated fraud-reporting hotline and email platform via childcare.gov to encourage parents, providers, and members of the public to report suspicious activity.
O’Neill emphasized that cutting off funding is only the first step, as authorities work to trace and recover stolen money.
He also demanded that Minnesota Governor Tim Walz submit a comprehensive audit of daycare centers in the state, including records on attendance, licensing, complaints, inspections, and past investigations.
The administration says funding will remain frozen until credible safeguards are put in place to prevent further abuse of taxpayer funds.
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