The federal government has frozen all child care payments to Minnesota as part of an investigation into alleged fraud within daycare facilities across the state. This decision, announced by Deputy Secretary of Health and Human Services (HHS) Jim O’Neill, follows claims of significant financial misconduct involving taxpayer funds.
The freeze on funding was confirmed on December 31, 2025, with O’Neill demanding that Governor Tim Walz conduct an audit of the centers implicated in the fraud. “We have turned off the money spigot and we are finding the fraud,” said O’Neill, emphasizing the need for accountability in child care funding.
The move comes after independent journalist Nick Shirley released footage of an empty daycare center, the Quality Learning Center, which reportedly received $4 million in federal funding despite appearing abandoned. Shirley suggested that Minnesota has allowed for what he termed “the largest fraud in US history” to persist.
Investigation and Response to Allegations
O’Neill indicated that the Administration for Children and Families (ACF), which oversees child care funding, has implemented a new “spend defend system.” This initiative requires all future payments to be justified with proof of legitimate use before they are disbursed. Alongside this measure, a hotline and email address have been established for reporting suspected fraud, welcoming input from parents, providers, and the general public.
The daycare highlighted by Shirley, which features a misspelled sign reading Quality ‘Learing’ Center, has attracted significant scrutiny. Despite receiving substantial federal funding, local residents noted a lack of children at the facility. “That parking lot is empty all the time, and I was under the impression that place is permanently closed,” one neighbor remarked.
Local politicians have expressed indignation over Governor Walz’s handling of the situation, arguing that signs of fraud were evident. Gubernatorial candidate Lisa Demuth stated, “Fraud is easy to find – if you’re willing to look for it.” Similarly, State Representative Tom Emmer criticized the administration on social media, questioning how such a blatant misuse of funds could occur.
Public Reaction and Future Steps
Following Shirley’s video, which garnered over 65 million views in just two days, residents raised concerns about the operational status of the Quality Learning Center. Reports suggested that children were brought in only after the video was released, raising further questions about the legitimacy of the daycare.
In response, Ibrahim Ali, the son of the facility’s owner, defended the business, stating that the center had not yet opened for the day when Shirley filmed. He attributed the misspelling of the sign to a graphic designer’s error and assured that it would be corrected.
The Quality Learning Center claims its operating hours are from 14:00 to 22:00, Monday through Thursday. As the investigation continues, the state faces mounting pressure to address the concerns raised by both the public and lawmakers.
The situation remains fluid as authorities work to unravel the extent of the alleged fraud and ensure that taxpayer funds are used appropriately in Minnesota’s childcare system.
