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The Trump administration is using allegations of fraud in Minnesota鈥檚 child care funding system to impose restrictions on federal child care funding across the country, putting providers and families who rely on federal subsidies at risk of huge disruptions.

For years, Minnesota has been investigating the fraudulent use of state and federal dollars in child care and other social services programs, which and have led to prosecutions. But the allegations have now by the Trump administration and have drawn more attention after a viral video from a right-wing influencer who claimed, without evidence, to have found federally funded child care centers without children in them.

What exactly the Trump administration is changing is not yet completely clear. In a on Dec. 30, 2025 to the social platform X, Department of Health and Human Services Deputy Secretary Jim O鈥橬eill wrote, 鈥淲e have frozen all child care payments to the state of Minnesota鈥� and in a video that the agency had 鈥渁ctivated our Defend the Spend system for all ACF [Administration for Children and Families] child care payments across America,鈥� and that it will 鈥渞equire a justification, receipt or photo evidence before we make a payment.鈥�

Days later, the administration that it is also freezing access to funding for the Child Care Development Fund (CCDF), a key source of federal funding for child care subsidies, as well as Temporary Assistance for Needy Families (TANF) and Social Services Block Grant money in five states 鈥� California, Colorado, Illinois, Minnesota and New York 鈥� and Biden-era rules that urged states to pay child care providers more similarly to how parents pay out of pocket. On Jan. 8, the five states against the move, saying the administration failed to adequately justify it, and on Jan. 9, a temporary restraining order blocking implementation of the freeze by the U.S. District Court for the Southern District of New York.

In response to a request for comment and clarification about the Defend the Spend changes to CCDF from 社区黑料, HHS spokesperson Emily Hillard wrote in an email, 鈥淭he onus is on the state to provide additional verification, and until they do so, HHS will not allow the state to draw down their matching funds for the CCDF program.鈥� The matching funds Hillard mentioned represent all remaining funds that Congress appropriated after states get their mandatory tranches, but sent last week to state agencies about the new requirements makes no mention of the additional verification applying only to matching funds, nor does it mention requiring receipts and photographs. Hillard said the additional justification required from states will not be as extensive as what it鈥檚 requiring from the Minnesota centers it suspects of committing fraud. She did not respond to additional clarifying questions.

This is not the first time the Trump administration has imposed extra justifications on child care funding, but it could be a much heavier burden than it was before. In early 2025, Elon Musk鈥檚 Department of Government Efficiency (DOGE) effort imposed what it called 鈥淒efend the Spend鈥� on both CCDF and . In April 2025, state agencies that disperse CCDF funds to child care providers were told they had to provide 鈥渏ustification,鈥� including 鈥渁 description of the award and what you plan to do with the funds,鈥� through a website when requesting the grant money that Congress had already appropriated for the program. At the time, it led to delays in the funding flowing to states, and in at least one state the delay caused providers to lay off staff or pay staff late.

But Ruth Friedman, senior fellow at The Century Foundation who served as director of the Office of Child Care at ACF under former President Joe Biden, said that requiring receipts and photographs is much more than what states had to share in the spring. 鈥淚t鈥檚 super concerning,鈥� she said, because these appear to be materials 鈥渢hat states are not currently required to necessarily have on hand.鈥� If that鈥檚 the case, and the new process 鈥渞equires new burdensome mandates to states,鈥� she said, 鈥渢hat will lead to significant delays in payments.鈥� 

That would mean many child care programs could go without being reimbursed for services they鈥檝e already provided, potentially leaving them unable to pay rent or make payroll. Friedman said she is aware of states that have already experienced delays in getting funds due to the new Defend the Spend requirements. 鈥淚t鈥檚 an attack on families and it鈥檚 an attack on child care,鈥� Friedman said.

It鈥檚 also redundant, as Friedman laid out. There are a number of systems in place to detect fraud and vet spending in the CCDF system. States have to conduct annual audits of child care providers, she said, and they have to submit quarterly financial reports to HHS as well as improper payment reports every three years. Every three years, states also have to submit lengthy plans to the federal government laying out how they will follow its rules, which are reviewed by HHS before states can get any money. States with high levels of improper payments are put on a payment plan and subjected to more careful monitoring. States are also required to have systems to detect and investigate fraud, and to impose sanctions whenever it鈥檚 found. The national improper payment rate 鈥� which could include fraud as well as mistakes like underpaying providers 鈥� for CCDF was in 2023.

In May 2025, the Defend the Spend requirement ended for CCDF, but it has stayed in place for Head Start programs. When a Head Start program administrator goes into the payment management system to draw down the money their program has already been awarded, requiring that they justify the money, although they haven鈥檛 had to submit receipts or photographs. 

Previously, dollars would typically show up in a Head Start program鈥檚 account 24 hours after the request was submitted. But with Defend the Spend in place, there have been reports of delays, said Katie Hamm, who served as deputy assistant secretary for early childhood development at ACF under Biden. 鈥淥ne thing that has been consistent is that every month there鈥檚 a couple of programs for whom it takes two weeks, and that really puts programs in a bind,鈥� Hamm said.

Programs can鈥檛 hold onto the money for more than three days and must make requests for funds they need to use immediately, so any delays are difficult to absorb. Some have had to start shutdown procedures, alerting staff and parents that they might have to close imminently, Hamm said, although she didn鈥檛 know of any that have actually had to shut down. The extra steps, and the delays they have caused, come despite the fact that programs鈥� budgets must be approved before they receive the grants in the first place, and are audited annually.

On top of reinstituting Defend the Spend for CCDF and freezing child care payments to Minnesota, the Trump administration planned to freeze key federal funding for child care and family assistance in five states, before a court order prevented the freeze on Friday. 

In nearly identical letters ACF sent to California, Colorado, Illinois and New York on Jan. 6, shared with the 74, the administration claimed it is 鈥渃oncerned by the potential for extensive and systemic fraud鈥� in the states鈥� CCDF programs and has reason to believe that the states are 鈥渋llicitly providing illegal aliens with CCDF benefits intended for American citizens and lawful permanent residents.鈥� ACF is therefore, the letters said, placing the states 鈥渙n temporarily restricted drawdown of CCDF funds until additional fiscal accountability requirements are implemented and necessary information is provided.鈥� Those requirements include submitting verified, non-identifiable attendance documentation for children who receive subsidies. 

States are not currently required to give attendance information to HHS, Friedman said, and the requested information may not even be something they already collect. 鈥淚 don鈥檛 think they鈥檙e going to have it on hand, and I don鈥檛 think it鈥檚 necessarily an easy lift or a quick lift to get it,鈥� she said. 

If the freeze eventually goes into effect, and states struggle to send ACF what it鈥檚 asking for and cannot draw down CCDF funding, they won鈥檛 be able to pay providers who accept subsidies, most of whom have already provided the care they鈥檙e getting paid for. 鈥淚t may be as severe as making them close their doors, it may mean they lose staff,鈥� Friedman said. If the system becomes destabilized, providers may reconsider accepting subsidies at all and only enroll families who can pay out of pocket. 鈥淭he child care sector, which is already teetering on the edge of crisis, becomes even more unstable,鈥� Friedman said.

All of those outcomes would mean fewer child care options for families who can鈥檛 afford the full cost. Without care, 鈥淭hey may not be going to work the next day, they may lose their jobs,鈥� Friedman said. 

The administration also announced other steps in reaction to the fraud allegations in Minnesota that are likely to financially hurt child care providers. In 2023, the Biden administration new rules to pay child care providers who accept federal vouchers more similarly to how parents pay out of pocket. It required that providers be paid based on enrollment so that they could count on steady payment even if children called out sick or skipped a day, and that they be paid upfront, rather than at the end of a month, so that the money better covered costs like rent and supplies. 

Without those changes, providers have to 鈥渆at the costs,鈥� said Friedman, who worked on the rules, and get reimbursed after having already provided the services. Instead, the changes had state agencies eat that cost, which gave providers more stability and made the program resemble private pay practices. 鈥淭hese were really, really important reforms,鈥� Friedman said. 鈥淚f you have a $12 billion program, that program shouldn鈥檛 be adding to the child care crisis and adding to destabilization in the sector.鈥�

Last week, HHS released a to rescind those changes, claiming it received feedback from several states and territories that the changes were 鈥渕ore costly and difficult to implement than HHS had estimated鈥� and were 鈥渙nerous,鈥� with no mention of fraud as justification. But then the administration an announcement about the proposed rescission that claimed the Biden-era rules 鈥渨eakened oversight and increased the risk of waste, fraud and abuse,鈥� citing the fraud allegations in Minnesota. In a posted to X, O鈥橬eill said the rules 鈥渨eakened accountability and made fraud easier and not harder.鈥� 

鈥淭hey鈥檙e just outright lying,鈥� Friedman said. But she fears that, while states are technically still allowed to pay providers upfront and for enrollment rather than attendance, the rhetoric around fraud will scare them off. 鈥淭hat will be devastating for providers,鈥� she said. 

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