Trump freezes federal daycare funds in Minnesota after finding massive fraud under Tim Walz's tenure

The Trump administration announced a freeze on federal funds earmarked for day care in Minnesota and demanded thorough audits of Democratic Gov. Tim Walz after detecting fraud schemes tied to programs funded with federal money.

The decision was communicated by the under secretary of the Department of Health and Human Services (HHS), Jim O'Neill, who stated on X that the move is in response to "Blatant fraud that appears to be rampant in Minnesota and across the country." As a result, O'Neill detailed that Washington decided to suspend disbursements until it has complete information on the use of the funds.

O'Neill further noted that he formally asked Gov. Tim Walz for a detailed audit of child care centers, including records of attendance, licensing, complaints, investigations and inspections. "We have turned off the money spigot and we are finding the fraud," the official said.

Democratic Gov. Walz rejected the measure and argued that fraudsters "are a real problem" that the state has been fighting for years. However, he accused the Trump administration of politicizing the issue.

"He's politicizing the issue to defund programs that help Minnesotans," the governor wrote on X.

From Washington, the response was that the problem exceeds isolated cases. In early December, a federal prosecutor argued that half or more of the roughly $18 billion in federal funds that supported 14 state programs in Minnesota since 2018 may have been stolen or misappropriated. Among the precedents is the Feeding Our Future case, a food fraud during the pandemic that resulted in 57 convictions and was called by prosecutors the largest COVID-19-linked fraud scheme in the United States, with losses estimated at $300,000,000.

Undersecretary Alex Adams of the Administration for Children and Families explained that Minnesota receives $ 185 million in federal child care funding annually. "That money should be helping 19,000 American children, including toddlers and infants. Any dollar stolen by fraudsters is stolen from those children," he said in a video posted on X.

Adams added that, after speaking with state authorities, he could not get clear assurances that the fraud allegations are isolated episodes and not a widespread problem throughout the system.

The decision to freeze the funds intensified political pressure on Gov. Tim Walz. Minnesota Republican lawmakers called for his resignation, claiming that deficiencies in the state's oversight mechanisms had allowed fraud schemes to operate in federally funded programs for years, including those for child care. Walz rejected those allegations and assured that his administration is cooperating with the ongoing investigations, while the case reopens the debate over the state's administrative responsibility in overseeing federal resources for sensitive programs such as childcare.