ST. PAUL, MN — The Department of Health and Human Services (HHS) suspended federal child care funding for all 50 states on December 31, 2025. The Trump administration started the freeze to ensure taxpayer money is spent properly following reports of widespread fraud.

Two top HHS officials, Jim O’Neill and Alex Adams, announced the freeze as part of a new "defend-the-spend" system. These rules require states to provide attendance records and photos to prove centers are open before receiving money. O’Neill also set up a new national hotline to report fraud.

The federal decision came after online creator Nick Shirley released a viral video on December 26, 2025. The video alleged that $110 million had been stolen through fraud at day care centers in Minnesota.

Investigations in Minnesota

Investigations in Minnesota have challenged some details in the video. Reporters from WCCO visited the ABC Learning Center in Minneapolis and saw more than 12 children and several staff members present. Security footage from that facility showed families dropping off children throughout the day on December 16, 2025.

Additionally, CBS News reviewed nearly a dozen child care centers mentioned in the video. Records showed that state inspectors visited all but two of those centers in the last six months and found their licenses were active. While some inspections found that centers had broken safety or training rules, the reports did not find evidence of fraud.

Broader Fraud Inquiries

Federal authorities were already investigating fraud in Minnesota before the video gained national attention. On December 28, 2025, FBI Director Kash Patel announced the agency had added more agents and tools to stop large-scale fraud schemes. Patel noted that the increase in fraud began well before the video went viral.

Federal prosecutors estimate that up to $9 billion in federal funds has been stolen since 2018. That amount accounts for nearly half of all the money set aside for 14 state programs, such as health and child care for low-income families.

Attorney General Pam Bondi reported that 98 people have been charged and more than 60 convicted in related cases. These cases involve a food program for children created during the pandemic, where dozens of people allegedly stole $250 million.

Official Responses

Minnesota Governor Tim Walz and Attorney General Keith Ellison have criticized the funding freeze. Walz said his administration has spent years fighting fraud and argued the federal government is using the freeze as an excuse to cut essential programs. The House Oversight and Government Reform Committee invited both Walz and Ellison to testify on February 10, 2026, about how the state manages its programs.

The funding freeze and public comments have caused tension in the Somali-American community because the government is investigating many Somali-owned businesses. President Trump suggested taking away the citizenship of those involved in fraud. He has also criticized Representative Ilhan Omar, who represents many of the areas where these businesses operate. Due to increased immigration checks, some Somali-American business owners said they now carry their U.S. passports to prove their citizenship if questioned.