Child care payments on pause in all states following alleged fraud in Minnesota, US DHHS says

NORTH CAROLINA (WTVD) -- An official with the US Department of Health and Human Services tells ABC News it is pausing child care payments to all 50 states following alleged fraud in Minnesota day care centers.

The move comes following the release of a video by conservative commentator Nick Shirley. In the video, Shirley allegedly visited daycares that he said have taken public funds, but there were no children when he visited.

ABC News has not independently verified any of his claims. Unrelated allegations of fraud have been under investigation by state officials dating back to the time of the Biden administration.

In a post on X, HHS Deputy Secretary Jim O'Neill announced new measures:

We have frozen all child care payments to the state of Minnesota. You have probably read the serious allegations that the state of Minnesota has funneled millions of taxpayer dollars to fraudulent daycares across Minnesota over the past decade. Today we have taken three actions against the blatant fraud that appears to be rampant in Minnesota and across the country: 1. I have activated our defend the spend system for all ACF payments. Starting today, all ACF payments across America will require a justification and a receipt or photo evidence before we send money to a state. 2. Alex Adams and I have identified the individuals in @nickshirleyy's excellent work. I have demanded from @GovTimWalz a comprehensive audit of these centers. This includes attendance records, licenses, complaints, investigations, and inspections. 3. We have launched a dedicated fraud-reporting hotline and email address at https://childcare.gov Whether you are a parent, provider, or member of the general public, we want to hear from you. We have turned off the money spigot and we are finding the fraud.

"It would jeopardize heavily subsidized centers, child care homes. A lot of the parents wouldn't be able to go to work, and it might impact the economy," said Dan Rockaway, who is a member of the North Carolina Task Force on Child Care and Early Education.

Tonight, it is not clear how long a pause will remain in place or how quickly documents would be processed.

"I was sort of surprised, but I've not been surprised of the Trump administration. I do think it's unfair that there is a lot of noise going on in Minnesota and it's impacting the other 49 states," Rockaway shared.

According to a February 2025 report from the Center for Child & Family Policy at the Sanford School of Public Policy at Duke University, there are 707,439 children ages five years old and younger in North Carolina. Among them, 457,000 children live in households with all parents working, and 36% of children in that age range use center-based care.

"The thought of the possibility of losing that kind of makes you angry, nervous, thinking that an interruption in subsidy would jeopardize the children that are being cared for," said Rockaway, who serves as President of the North Carolina Licensed Child Care Association and operates four child care centers in North Carolina.

He does not believe there will be immediate interruptions to services, though the announcement could cause confusion.

"I'm imagining that we're going to continue to serve our subsidized children, that the states are going to come up with the way to pay if it if they haven't already received that first quarter draw on the block grant," said Rockaway.

In a statement, a spokesperson for Governor Josh Stein tells ABC11:

"NCDHHS has not received formal notice from the federal government related to this matter. Our office will continue to work to protect the welfare of kids across North Carolina and root out fraud. As Attorney General, Governor Stein worked with federal partners to fight health care fraud and recovered millions of taxpayer dollars."

A spokesperson for the North Carolina Attorney General's Office tells ABC11 it is reviewing the matter.