Records show Minnesota hasn't done effective daycare fraud audit in decade

Audits conducted over the past decade have found that Minnesota lacked the ability to properly verify attendance records and pursue potential fraud within its childcare assistance system.

The findings have drawn renewed attention amid national scrutiny of Minnesota following allegations of widespread fraud involving childcare networks in the state. The issue gained prominence after independent journalist Nick Shirley released a video showing visits to multiple daycare centers, largely within the Somali community, that appeared to be empty or not in operation despite reportedly receiving public funding. Federal and state investigators began reviewing the centers highlighted in the video.

According to a report by CBS News, the federal Office of the Inspector General released an audit in May of last year examining 200 randomly selected childcare assistance payments from 2023. The audit found dozens of instances in which “Minnesota did not comply with requirements related to attendance and payment for services.”

Auditors extrapolated those findings and concluded that Minnesota was likely making at least one error in 11 percent of payments made to 1,155 childcare centers that year, indicating massive abuse within the Child Care Assistance Program (CCAP) payment system.

"Minnesota's limited oversight of attendance documentation at childcare centers resulted in overpayments to providers," the audit said. "A lack of oversight to ensure accurate and complete attendance documentation could increase the risk of fraud, waste and abuse to the CCAP program."

The Office of the Inspector General recommended that the state strengthen its monitoring efforts, including routine reviews of CCAP attendance records to ensure accuracy.

Following this, the Department of Health and Human Services agreed with this recommendation and wrote that it is expanding the Early and Often Program, which "aims to ensure that new childcare centers meet the requirements of CCAP by increased monitoring of their attendance record-keeping practices and compliance with state statutes."

In January of 2025, Department of Children, Youth and Families Commissioner Tikki Brown acknowledged gaps in the state’s fraud detection system related to attendance reporting.

"We certainly need to investigate that more thoroughly to ensure that agencies do have as broad authority as possible to investigate fraud and act on all aspects of fraud. I don't know that that's fully present," Brown said.

Concerns over oversight in the state are not new. A 2019 report by the Office of the Legislative Auditor found that the Minnesota Department of Human Services created a team in 2013 to investigate childcare providers suspected of committing fraud. Reviewing cases from 2013 to 2018, the office found that prosecutors were able to “prove” $5-$6 million in fraud during that period.