HHS warns Minnesota about returning millions for not supplying child care center documents

HHS Warns Minnesota Over Child Care Record Submission Amid Fraud Scandal

In Washington, the Department of Health and Human Services (HHS) has issued a serious warning to Minnesota regarding the potential repayment of hundreds of millions in federal funds if the state fails to submit required child care records. This comes amidst an escalating fraud investigation.

On January 15, HHS sent two letters to Tikki Brown, who heads the Minnesota Department of Children, Youth, and Families. The letters highlighted her department’s failure to provide necessary information in a timely manner as mandated by federal regulations.

Alex Adams, Assistant Secretary at HHS Office of Children and Families, mentioned that Minnesota has a 60-day deadline to provide these records, which are expected to be submitted for the fiscal year 2025. He stated, “In early December, HHS requested data such as enrollment and attendance records to assure taxpayers that their money is being spent appropriately. Unfortunately, Minnesota hasn’t sent that information yet. We aren’t just asking anymore; we’re demanding it.”

If the state does not comply by March 16, HHS Assistant Secretary Jim O’Neill has indicated that the department will “pursue full penalties under the law.” The penalties could involve requiring Minnesota to repay past funds and could also disqualify the state from future funding.

According to federal regulations, the state could lose funds equivalent to the amount improperly disbursed. Recent audits revealed that child care centers, which received federal block grants, failed to keep accurate attendance records and lacked essential financial controls.

Funding for youth facilities primarily comes from HHS’s Child Care Development Fund (CCDF), which is a significant block grant program in the United States. Minnesota is one of five Democratic-led states facing review for over $10 billion in funding suspensions, alongside New York, California, Colorado, and Illinois.

A federal judge recently halted some of the funding freezes for programs like CCDF and Temporary Assistance for Needy Families (TANF). Meanwhile, HHS officials have been actively engaging with whistleblowers in Minnesota about the alleged fraud, with more than 500 individuals reportedly reaching out to them.

The scandal gained additional attention due to a viral video, released on December 26, showing several child care centers funded by taxpayers appearing closed or non-operational. Furthermore, a former federal prosecutor suggested that this scheme could have misappropriated up to $9 billion since 2018, particularly focusing on one Somali-run child care center in the Twin Cities that was indicted for allegedly stealing over $250 million.

Although the fraud scandal surfaced during Governor Tim Walz’s campaign for a third term, which concluded with his resignation on January 5, HHS officials are proceeding with assurance that any required repayments and penalties will not be derailed by legal challenges.

As of late January, Minnesota still had not submitted requested attendance or testing records. Adams mentioned, “The only written response we’ve received has been requests for delays.”

In another letter dated January 15, Laurie Toddsmith, deputy assistant secretary for early childhood development, informed Brown of an upcoming inspection of Minnesota’s CCDF-funded programs, set for this week. This review will examine the state’s policies, procedures, and practices in fraud prevention, accountability, and provider oversight.