The Department of Homeland Security (DHS) is currently conducting a large-scale investigation into allegations of fraud at daycare centers in Minnesota, particularly in Minneapolis. Secretary Kristi Noem announced that agents from the DHS’s Homeland Security Investigations (HSI) are on the ground, responding to claims of significant financial misconduct linked to these facilities. The investigation was prompted by independent journalist Nick Shirley, who reported on apparent discrepancies in the operations of several daycare centers that allegedly received millions in federal aid without providing adequate services.

Reports indicate that the fraud issue has persisted since at least 2014, with investigations revealing that individuals transported large sums of cash out of the Minneapolis-St. Paul International Airport, with significant increases noted from 2016 onward. Allegations suggest that daycare providers falsely claimed to offer essential services to vulnerable populations, thereby illegally obtaining millions in government funding. Surveillance footage has shown parents signing their children into daycare facilities and leaving shortly thereafter, allowing these centers to bill the state for care that was not provided. Some parents reportedly received kickbacks for their involvement in the scheme.

The Minnesota Department of Human Services has been addressing fraudulent activities since 2014, and by 2018, numerous businesses were under scrutiny for misappropriating government funds intended for legitimate childcare services. Estimates suggest that approximately $300 million has been misappropriated from various state programs, including the food program Feeding Our Future and the state autism program.

In response to the ongoing allegations, the U.S. Department of Health and Human Services announced on December 30, 2025, that it would freeze all federal child care payments to Minnesota, citing credible allegations of widespread fraud. This decision affects approximately $185 million in annual aid to the state's daycare facilities. Deputy Secretary Jim O’Neill emphasized the need for accountability, stating that funds will only be released once states demonstrate legitimate use.

The investigation has drawn scrutiny towards Governor Tim Walz's administration, with accusations of negligence in addressing warnings about fraud. State Representative Kristin Robbins has criticized the administration for ignoring evidence of violations among daycare providers, including one facility that reportedly received $4 million while having no children enrolled. The controversy has raised broader concerns about the integrity of taxpayer-funded programs and the implications for community welfare, particularly among immigrant populations.

As investigations continue, federal agencies, including the FBI, are focusing on dismantling large-scale fraud schemes that exploit federal programs. The situation highlights systemic vulnerabilities in oversight and accountability within state-funded programs, raising questions about the effective management of public resources and the potential impact on vulnerable populations relying on these services.