What to Know About the Trump Admin’s Freeze on Federal Child Care Funds

Major changes are due to hit federally subsidized child care providers for the new year, following concerns of widespread fraud.

The Trump administration has moved to freeze child care funding to all 50 states, pending additional verification steps on the part of the providers.

This comes on the heels of a series of fraud investigations in Minnesota, centered around day care centers run by Somali residents.

Here’s what we know about the funding freeze.

Incoming Freeze

Health and Human Services (HHS) Deputy Secretary Jim O’Neill on Dec. 30 announced a freeze on child care payments to all states.

According to the HHS official, the Administration for Children and Families was halting all federal subsidies, pending further oversight by the department.

The Administration for Children and Families covers multiple programs, including the Child Care and Development Fund, Temporary Assistance for Needy Families, the Head Start program, and refugee assistance programs.

Several of those programs provide subsidies that help states support low-income families in obtaining child care services so the parents are able to work.

O’Neill stated that additional documentation, such as attendance records, licensing, and audits, would be required before payments would again be released.

All 50 states will need to provide additional verification and other data. Minnesota, however, will require more layers of verification to ensure that its child care centers are up to federal regulations.

“Funds will be released only when states prove they are being spent legitimately,” the deputy secretary said.

Department of Homeland Security Secretary Kristi Noem and FBI Director Kash Patel both announced increased operations in Minnesota days before the freeze.

The Reason

The HHS announcement came after widespread allegations of fraud involving day care centers and other government-subsidized programs—specifically in Minnesota.

The administration started an effort to track down fraud in Minnesota just days ago, including uncovering inappropriate use of funding, and enhanced inspections of centers receiving funds.

However, recent reports indicate that child care centers, run mostly by Somali immigrants, could account for billions of dollars in stolen taxpayer funds. Some of those funds have allegedly been sent to assist the Somalia-based terrorist group Al-Shabaab.

Minnesota alone receives $185 million per year in child care funds from the Administration for Children and Families, according to Assistant Secretary Alex Adams.

Last month, a federal prosecutor suggested that more than half of the roughly $18 billion in federal funds that supported 14 programs in Minnesota since 2018 may have been stolen. A majority of the programs named as defendants were involved in child nutrition, housing services, and autism programs, which were run by Somali Americans.

News of the halt in funding comes just days after a Dec. 31 announcement that the House Oversight Committee will hold hearings focused on social service program fraud in the state.

“American taxpayers demand and deserve accountability for the theft of their hard-earned money,” said Rep. James Comer (R-Ky.), the chairman of the Oversight Committee.

“Congress has a duty to conduct rigorous oversight of this heist and enact stronger safeguards to prevent fraud in taxpayer-funded programs, as well as strong sanctions to hold offenders accountable.”

The committee’s investigation into fraud in Minnesota began on Dec. 22 when Comer asked Treasury Secretary Scott Bessent and Attorney General Pam Bondi to look into the state’s activities.

Comer accused local leaders of failing to prevent the fraud.

“Whistleblowers have made it clear that American taxpayers were defrauded in Minnesota, raising serious questions about whether Gov. [Tim] Walz and Attorney General [Keith] Ellison failed to act or were complicit in the theft,” Comer said in a statement.

“The House Oversight Committee is aggressively investigating widespread fraud in Minnesota’s social services programs and the failures of Gov. Walz’s administration that allowed taxpayer funds to be funneled to terrorist networks responsible for the deaths of Americans.”

Official Response

State officials in Minnesota have spoken out against the federal government’s decision to cut funds, alleging that the decision was politically motivated.

Walz, the 2024 Democratic vice presidential nominee, said in a social media post that the state has already worked to crack down on fraudsters.

“He’s politicizing the issue to defund programs that help Minnesotans,” Walz said, alleging that the move is a part of “Trump’s long game.”

When the investigation into Minnesota fraud began, the governor said that his administration had made “systematic changes to state government” over the past three years and that “detecting fraud is resource intensive and time consuming—especially when it comes to the federal Medicaid programs that have a complex interplay between private insurance companies and federal, state and county governments.”

“Is it impossible? No,” he said. “We have made significant progress. We have much more to do.”

Ellison, the Minnesota attorney general, said, “The Trump administration is threatening funding for the essential childcare services that countless families across Minnesota rely on.”

“To say I am outraged is an understatement,” he said.

The administration announced on New Year’s Eve that federal agencies are “absolutely” taking steps to revoke the citizenship of Somalis convicted of fraud.

Since 2022, almost 100 individuals, primarily of Somali descent, have been charged in connection with fraud schemes in Minnesota.

The fraud cases in Minnesota also prompted citizen investigators in other states to start looking into allegations of fake child care centers in their communities.

Jackson Richman and Janice Hisle contributed to this report.