Audit For 2012 Found $16M In ‘Improper’ Child Care Payments To Minnesota – And Millions More Has Been Sent To State Since
Federal officials are now withholding child care funding from Minnesota as investigators widen probes into what they describe as massive fraud across state-administered social service programs, but warning signs about the system’s vulnerabilities were documented years earlier.
Health and Human Services officials have frozen payments to Minnesota while demanding proof that fraudulent billing has been eliminated. Other states are also under review and face similar funding suspensions unless they can demonstrate corrective action.
The scrutiny follows claims by First Assistant Minnesota U.S. Attorney Joe Thompson that billions of taxpayer dollars have been siphoned off over several years. At a Dec. 18 news conference in Minneapolis, Thompson said investigators estimate that since 2018, at least $9 billion intended for child care, nutrition, housing, health care, and related programs across 14 state-run systems has been stolen.
“The magnitude cannot be overstated,” Thompson said. “What we see in Minnesota is not a handful of bad actors committing crimes. It’s staggering, industrial-scale fraud.”
The political pressure intensified after President Trump, Treasury Secretary Scott Bessent, and Republicans in Congress launched multiple investigations into Minnesota’s social service agencies, seeking records from state officials and Democratic Gov. Tim Walz. Federal data reviewed by The Post shows that since Walz took office in January 2019, Minnesota has received more than $2.1 billion in combined Child Care Development Fund (CCDF) and Temporary Assistance for Needy Families (TANF) funding.
Long before the current controversy, however, federal auditors had already identified systemic weaknesses. A Department of Health and Human Services Office of Inspector General report released in July 2016 found that nearly 18.91% of all federal child care payments made to Minnesota providers in fiscal year 2012 were deemed “improper.” That amounted to roughly $16 million in questionable spending.
The audit also criticized state oversight failures, noting that Minnesota officials did not disclose how many providers receiving improper payments had been flagged internally or referred to law enforcement. Despite identifying billing problems, the state did not bar any of the suspected providers from continuing to receive taxpayer funds.
Auditors further found that state agencies had not “[c]hecked for multiple providers that are billing for the same child at the same time” and had failed to conduct “on site” inspections of sub-recipients, even as federal dollars continued to flow.
Nationally, the inspector general determined that about $311 million in improper payments were made through CCDF, the third-largest federal block grant program, behind TANF and the Department of Housing and Urban Development’s Community Development Block Grants.
In Minnesota alone, CCDF reimbursed more than $85.5 million in child care costs in fiscal year 2015. Applying the earlier error rate would put erroneous payments at approximately $16.2 million for that year.
A decade later, the numbers grew far larger. Minnesota was slated to receive more than $185 million in CCDF funding, even though reported enrollment in child care programs had dropped by nearly half. That sharp contrast has fueled accusations that weak oversight enabled fraud on an even greater scale.
“The red flags are obvious,” Republican state Rep. Kristin Robbins said in a recent interview with NewsNation’s Rich McHugh. “It’s multiple services by one provider, and it’s an easier barrier to entry, not a lot of checks on the providers.”
Public attention escalated after YouTuber Nick Shirley posted a more than 40-minute video documenting visits to child care centers that collectively received $111 million in taxpayer funding but appeared closed or empty. Of the 10 facilities he visited, reporters from the Minnesota Star Tribune later found that only four had children present during follow-up checks.
For the most recent completed fiscal year, which ended Sept. 30, CCDF allocated more than $11.6 billion nationwide for state child care services, more than double the amount distributed a decade earlier. Minnesota’s share, exceeding $185 million, had been earmarked for roughly 4,000 centers serving about 23,000 children — a ratio of roughly one center for every five or six kids.
By comparison, at the time of the 2016 audit, Minnesota providers were serving more than 47,000 children while receiving about $100 million less in federal funding.
Minnesota was one of only nine states cited in the inspector general’s report for exceeding a 10% threshold for improper payments, triggering a federal requirement for mandatory onsite monitoring going forward.
“The most common reason these States cited for not recovering improper payments was that the overpayments identified in the error rate reviews were due to caseworker or agency error, not to fraud,” the report stated.
The audit concluded with a broader warning that now appears prescient: “Given the CCDF program’s susceptibility to fraud and improper payments, as well as recent health and safety concerns, it is critical for ACF and States to employ effective measures to ensure the integrity of their CCDF programs.”
{Matzav.com}
