HHS warns Minnesota may have to repay millions for withholding child care program records

WASHINGTON, DC: The Department of Health and Human Services issued a sharp warning to Minnesota, saying the state could be forced to return hundreds of millions of dollars in federal funding if it continued to withhold records tied to child care centers receiving taxpayer money.

Federal officials said that repeated requests for documentation had gone unanswered, raising concerns about oversight failures as scrutiny intensified around alleged fraud in state-run child care programs.

Federal officials escalate dispute 

The warning was delivered in two letters dated January 15 and sent to the Minnesota Department of Children, Youth, and Families Commissioner Tikki Brown, according to the New York Post.

The letters accused the state of failing to comply with federal regulations that required timely disclosure of program records.

Alex Adams, assistant secretary at HHS’ Administration for Children and Families, said Minnesota had not produced basic records that would allow the federal government to verify whether funds were being properly spent.

“Attendance records, inspection records- things that would give confidence to the American taxpayers that child care dollars are going to actual children,” Adams said. “Minnesota has still not sent that information. We are no longer asking; we are now demanding.”

HHS data showed that Minnesota received $184,928,081 in federal funding for youth-related services during fiscal year 2025.

March deadline set as repayment and funding cuts loom

HHS Deputy Secretary Jim O’Neill said that the department will move forward with penalties if Minnesota did not comply by March 16.

O’Neill said HHS “will pursue full penalties under the law against the state” if officials failed to provide the requested materials within the 60-day window.

Federal regulations allow HHS to claw back funds already distributed and reduce future allotments.

Adams told the New York Post that repayment could be imposed through administrative deductions.

“An amount equal to or less than the improperly expended funds will be deducted from the administrative portion of the State allotment for the following fiscal year,” according to the regulations.

Audits flag missing attendance records and weak controls

Concerns over Minnesota’s compliance intensified after reviews by the HHS Office of Inspector General and the Minnesota Office of the Legislative Auditor.

Those reviews found that some child care centers receiving federal funds failed to maintain daily attendance records, while others lacked what auditors described as “adequate financial controls.”

The funding at issue largely came from the Child Care and Development Fund, one of the federal government’s largest block grant programs.

This happened after Trump slammed Governor Tim Walz over fraud revelations repeatedly.

Minnesota among states facing heightened federal scrutiny

Minnesota is one of five Democrat-led states along with New York, California, Colorado and Illinois that recently had large portions of their HHS block grant funding paused and placed under review.

Collectively, the affected funding exceeded $10 billion.

A federal judge temporarily blocked the funding freeze on January 9, halting restrictions on CCDF, Temporary Assistance for Needy Families, and Social Services Block Grant programs.

Even so, federal officials have continued oversight efforts.

Since the court ruling, O’Neill and Adams traveled to Minnesota to meet with whistleblowers and state officials as part of the ongoing investigation.

Adams said more than 500 individuals have come forward with tips related to alleged fraud.

The state came under lens after a video by Youtuber Nick Shirley exposed the alleged fraud.