Minnesota Day Care Scandal Overview
WASHINGTON — The day care scandal in Minnesota has been developing for years.
According to an audit conducted almost a decade ago, nearly 20% of taxpayer money, approximately $16 million, that was intended for child care centers was misappropriated. This audit was highlighted during the Trump administration, focusing on the state’s child care system.
A report from the Department of Health and Human Services Office of Inspector General (HHS-OIG), published in July 2016, indicated that about 18.91% of federal payments to Minnesota child care centers in fiscal year 2012 were classified as “inadequate.”
Interestingly, Minnesota didn’t inform HHS-OIG auditors about how many organizations received reports of violations from state authorities, or those referred to law enforcement. It’s a bit concerning that state authorities didn’t disqualify the suspected fraudsters from receiving additional funding, even though investigations were underway.
Nationwide, HHS-OIG reported that around $311 million in “improper payments” were made from the Child Care Development Fund (CCDF), which ranks as the third-largest block grant program in the U.S., following HHS’s Temporary Assistance for Needy Families (TANF) and HUD’s Community Development Block Grant (CDBG).
In fiscal year 2015, Minnesota received reimbursements exceeding $85.5 million for child care, suggesting that if the 2012 errors hold true, nearly $16.2 million in incorrect payments occurred.
Fast forward ten years, and the state is projected to receive over $185 million despite reports of enrollment halving. This discrepancy places Minnesota in the midst of a political uproar, facing accusations of permitting fraudsters to siphon vast sums meant for child care and other federal social services.
Republican Minnesota Rep. Kristin Robbins remarked, “The red flags are clear,” in an interview. She noted a lack of checks on providers and that multiple services often came from one provider, indicating a troubling trend.
YouTuber Nick Shirley stirred public attention by posting a video about a daycare center that was funded with $111 million in taxpayer money but seemed either closed or devoid of children. A follow-up by a local reporter revealed that during the 10 days of care he examined, only 4 days had children present.
Earlier this month, Minnesota First Assistant Attorney General Joe Thompson stated that since 2018, fraudsters have misappropriated at least $9 billion in taxpayer money intended for various services across 14 states. He described the situation as “incredible, industrial-scale fraud.”
The state’s Democratic Governor, Tim Walz, alongside President Trump and several Republican lawmakers, has faced scrutiny, with multiple investigations targeting Minnesota’s social services agencies.
Since Governor Walz took office in January 2019, Minnesota has received more than $2.1 billion in CCDF and TANF funds, according to HHS data.
In response to the findings, HHS halted all funding to Minnesota until officials could guarantee that no unauthorized payments were made. Other states are also being examined for potential fraud and will not receive further support until they prove their systems are sound.
For fiscal year 2025, CCDF has proposed a budget exceeding $11.6 billion for child care services, which is significantly higher than allocations from a decade ago.
Minnesota’s share of more than $185 million was set to be distributed to around 4,000 centers, catering to roughly 23,000 children statewide. Despite the issue highlighted in the 2016 HHS-OIG audit, where centers were responsible for over 47,000 children but received $100 million less, funding continues to rise.
Minnesota was one of just nine states that exceeded the 10% error payment threshold identified in the 2016 report, which had recommended “on-site visits” to ensure compliance going forward.
Officials from the Minnesota Department of Children, Youth and Families did not reply to requests for comment.
