Health Dept. Pauses Child Care Funding to Minnesota, Citing State’s Fraud Scandal

The pause affects a funding stream that provides $185 million in annual aid to the state’s day care centers, as federal investigations into fraud in Minnesota’s social services programs continue.

The Health and Human Services Department said on Tuesday that it had paused its child care payments to Minnesota, days after the posting of a widely circulated video that added new accusations to a fraud scandal in the state’s social services programs and led conservatives to call for a government crackdown.

The decision blocks a funding stream that provides $185 million in annual aid to Minnesota day care centers, according to the health department.

More than a dozen schemes have come to light in Minnesota in recent years, many of them involving people of Somali origin. Prosecutors say the schemes have cost taxpayers billions of dollars. The scandal has rattled Minnesota politics and drawn the ire of the White House.

On Friday, a conservative active on social media, Nick Shirley, posted a video purporting to uncover rampant fraud in day care centers run by people of Somali origin. While day care centers in Minnesota have been prosecuted for overbilling in the past, none of the centers featured in the video have been accused of fraud by the authorities. Nevertheless, the video drew accolades from several senior White House officials.

Jim O’Neill, the deputy health secretary, said in a video statement on Tuesday that the department was pausing the funding in response to “credible allegations” of “extensive fraud” in Minnesota’s child care programs. Mr. O’Neill said he had sent a letter to the state’s governor, Tim Walz, a Democrat, demanding a thorough audit of the state’s day care centers.

In a statement, Mr. Walz’s office said the governor had been combating fraud “for years.”

“Fraud is a serious issue,” said the statement. “But this is a transparent attempt to politicize the issue to hurt Minnesotans and defund government programs that help people.”

Alex J. Adams, an assistant health secretary, joined Mr. O’Neill in the video statement and said that he had spoken on Monday with Cindi Yang, Minnesota’s child care services director, who had been unable to tell him whether fraud in the state’s social services system was isolated or widespread.

Carissa Larsen, a spokeswoman for the Minnesota Department of Children, Youth, and Families, which oversees government-subsidized day care centers, said on Tuesday evening that agency officials were aware of the announcement but were not in a position to comment.

Two weeks ago, Mr. Walz applauded new federal charges in a widening, yearslong federal investigation into his state’s social services programs and promised that state officials were working to overhaul the troubled system. But Mr. Walz has been facing criticism from President Trump and Minnesota Republicans, who charge that the state lacked adequate safeguards.

Mr. Walz, who is seeking re-election, wrote in an opinion piece in The Minnesota Star Tribune this month that his state had made “significant progress” in rooting out fraud in its social services system but had “much more to do.”

“And it’s my responsibility to fix it,” he wrote.

More than 90 people have been charged in federal fraud investigations in Minnesota, which began during the Biden administration, and at least 60 have been convicted. In announcing charges against six more people accused of defrauding safety net programs, Joseph H. Thompson, the prosecutor overseeing the investigation, said this month that the authorities had identified “staggering, industrial-scale fraud” in Minnesota’s safety-net programs.

The schemes, which took root in pockets of Minnesota’s Somali community, targeted government programs meant to feed children during the Covid-19 pandemic, to help children with autism and to assist people at risk of homelessness. The authorities say that fraudsters billed the state government for social services that were never provided.

Mr. Trump has seized on the scandal, using it to unleash xenophobic tirades against America’s Somali community.

Mr. O’Neill said in his video statement that the health department had also taken steps to secure the national Administration for Children and Families system, requiring that future payments around the country would need to be certified with a receipt or photo evidence. The department also created a new hotline for reports of fraud, he added.

“We’re committed to holding bad actors accountable,” Mr. O’Neill said in the video. “Regardless of rank or office, anyone who’s involved in perpetrating this fraud against the American people should expect to be prosecuted to the fullest extent of the law.”

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