WASHINGTON — The US Department of Health and Human Services is rolling back a Biden administration rule that didn’t require the agency to verify whether kids were attending federally funded child care centers — and after accusations of rampant fraud, The Post can exclusively reveal.
HHS officials announced Monday that rescinding parts of the federal rule will restore “attendance-based billing,” stop states from paying the child care centers upfront and no longer prefer facilities that have pre-existing contracts over those receiving parental vouchers.
Between 2021 and 2024, the Administration for Children and Families shelled out more than $91.8 billion from its Child Care Development Fund (CCDF), a federal block grant program that helps fund child care centers in states, US territories and tribes, per HHS data.
A whopping $56 billion went to the centers just in 2021, during the height of the COVID-19 pandemic.
The rule took effect on April 30, 2024, meaning nearly $24 billion in taxpayer dollars may have been spent before President Trump and his administration moved to update the provisions.
“Congress appropriated this funding to support working families and ensure children have safe places to grow and learn,” HHS Secretary Robert F. Kennedy Jr. said.
“Loopholes and fraud diverted that money to bad actors instead. Today, we are correcting that failure and returning these funds to the working families they were meant to serve.”
The officials froze all future funding from CCDF — the third-largest block grant program after Temporary Assistance for Needy Families (TANF) and the Department of Housing and Urban Development’s Community Development Block Grants — last week until states can verify there is no fraud.
“Paying providers upfront based on paper enrollment instead of actual attendance invites abuse,” said HHS Deputy Secretary Jim O’Neill. “In Minnesota, we’ve seen credible and widespread allegations of fraudulent daycare providers who were not caring for children at all. The reforms we are enacting will make fraud harder to perpetrate.”
Minnesota has been at the center of allegations that the state-overseen programs are enabling fraud after a viral video from YouTuber Nick Shirley alleged nearly a dozen day cares in the state had taken $111 million in federal funding — but apparently had no children attending.
Subsequent reports from the Washington Post and Minnesota Star Tribune found a little less than half of the child care centers the influencer visited did, in fact, have children enrolled as well as some present on the day he visited.
Democrats in the state and nationwide have rejected the fraud claims, while the Trump administration and congressional Republicans have homed in on the accusations, with a public hearing scheduled on the issue this week in Washington, DC.
The state’s Democratic governor, Tim Walz, announced an hour before HHS nixed the rule’s provisions that he wouldn’t seek re-election to a third term, saying that a campaign protecting his “own political interests” would distract from “defending the people of Minnesota against the criminals who prey on our generosity and the cynics who prey on our differences.”
More than a decade before, HHS’ Office of Inspector General audited states and found tens of millions of dollars were being erroneously paid out to child care centers.
In Minnesota, more than $16 million in “improper payments” — roughly one-fifth of all program dollars — were flagged in fiscal year 2012, but state officials didn’t disqualify any centers from getting future funds or refer any to law enforcement for violations.
Here’s the latest on the Minnesota fraud scheme:
That HHS OIG audit also found that Minnesota officials never “[c]hecked for multiple providers that are billing for the same child at the same time” or conducted “on site” visits to centers.
Walz led the state from January 2019 to the present as it received more than $2.1 billion in CCDF and TANF money alone, HHS data show.
It was one of only nine states that broke the 10% threshold for improper payments in the HHS inspector general’s audit, forcing the feds to mandate “onsite visits” to ensure future compliance.
HHS will only restore funding to Minnesota for the child care centers once “a receipt or photo evidence” for all payments is provided and the state conducts a “comprehensive audit.”
In total, prosecutors claimed last month the total fraud in the state could reach as much as $9 billion across all federal programs providing funding.
Three Republican state representatives in the Gopher State are coming to testify about the child care fraud allegations Tuesday on Capitol Hill.
“The red flags are obvious,” one of them, state Rep. Kristin Robbins (R-Maple Grove), told NewsNation’s Rich McHugh in an interview last week. “It’s multiple services by one provider, and it’s an easier barrier to entry, not a lot of checks on the providers.”
The Trump administration will allow for a 30-day public comment period before the revised rule takes effect.
HHS previously launched a hotline that has received 245 reports of possible fraud, according to officials.
“When controls are not in place, bad actors can bill for children who aren’t there,” said Alex Adams, assistant secretary for family support. “Families and taxpayers deserve proof that services are being delivered to children.”
