The federal government has suspended all child care payments to Minnesota due to allegations of widespread fraud within the state’s daycare system. This decision, announced on December 31, 2025, by Deputy Secretary of Health and Human Services (HHS) Jim O’Neill, comes amid growing concerns over misuse of taxpayer funds and follows a troubling report by independent journalist Nick Shirley.
O’Neill’s statement made it clear that measures are being put in place to address the suspected fraud, emphasizing that the HHS has “turned off the money spigot” while investigations unfold. The freeze on funding specifically targets centers that have been accused of improper practices, and O’Neill has called upon Minnesota’s Governor Tim Walz to conduct an audit of these facilities.
In a dramatic turn of events, Shirley released footage showing an apparently empty daycare in Minnesota, which had reportedly received millions in federal funding. His investigation has prompted O’Neill to state that Minnesota may be facing “the largest fraud in US history,” as he highlighted that the state has funneled substantial taxpayer dollars into these alleged fraudulent operations over the past decade.
As part of the response, O’Neill has initiated a new protocol, termed the “spend defend system,” which demands proof and justification for all child care payments across the country. He, along with Alex Adams, Assistant Secretary at the HHS, claims to have identified individuals involved in the alleged scheme.
To facilitate reporting of suspected fraud, the HHS has established a hotline and email address aimed at gathering information from parents, providers, and the public. O’Neill expressed a commitment to transparency and accountability, inviting citizens to share their experiences or concerns.
The daycare highlighted in Shirley’s report, named the Quality ‘Learing’ Center, has sparked significant criticism, particularly due to its misspelled sign. Despite receiving approximately $4 million in federal funding, the facility reportedly had no visible children present at the time of filming. Local politicians have reacted with anger at Governor Walz’s perceived inaction regarding the situation.
Lisa Demuth, a gubernatorial candidate, criticized the administration, stating that “Fraud is easy to find – if you’re willing to look for it.” She pointed out that many of the businesses implicated in the scandal had already faced licensing violations, which should have raised red flags.
State Representative Tom Emmer also voiced concerns, addressing Walz directly on social media: “Four million dollars of hard-earned tax dollars going to an education center that can’t even spell learning correctly. Care to explain this one, Tim Walz?”
Following the release of Shirley’s video, which garnered over 65 million views within 48 hours, allegations emerged that the center was attempting to quickly bring in children to dispel suspicions. Local residents noted that they had never seen children at the facility, leading to skepticism about its operations.
In response, Ibrahim Ali, the son of the daycare’s owner, suggested that the timing of the video was misleading, claiming the center had not yet opened for the day when Shirley filmed. He attributed the misspelling on the sign to a graphic designer’s error, asserting that it would be corrected.
The Quality Learning Center claims to operate from 2 PM to 10 PM, Monday to Thursday, further complicating the narrative around its legitimacy.
As investigations continue, the federal government’s actions reflect a serious commitment to rooting out fraud within the child care system in Minnesota. This evolving situation highlights the critical need for oversight and accountability in programs designed to support families and children.
