Fact Check Team: States tighten oversight on childcare funds amid fraud concerns

WASHINGTON (TNND) — In response to the discovery of alleged fraud involving billions of dollars in Minnesota’s childcare subsidy programs, states across the nation are scrutinizing their own systems to prevent similar issues.

While Minnesota remains the focal point of federal scrutiny, states like California, New York, Illinois, and Colorado are facing funding freezes for their childcare programs, for alleged fraud, according to the Trump Administration. Nationwide, stricter rules tied to attendance within childcare centers receiving funds are being implemented, according to the U.S. Department of Health and Human Services. Meanwhile, Idaho, Utah, Ohio, and Texas are reviewing safeguards and considering audits as a precautionary measure, despite no confirmed local fraud.

Childcare centers under the microscope

The heightened scrutiny follows federal concerns about potential misuse of funds in Minnesota, prompting states to ensure their oversight systems are enough to sift through everything. Governors, state agencies, or lawmakers in Utah, Ohio, Idaho, and Texas have publicly stated there is no confirmed widespread fraud locally, but they are reviewing eligibility checks, attendance tracking, and payment controls. This proactive approach involves internal audits, data reviews, and verification checks rather than criminal prosecutions.

What is childcare fraud?

Childcare fraud typically involves the misuse of subsidy funds through falsified documents or fake claims, such as inflating the number of children attending a daycare. The federal government allocates nearly $31.26 billion annually to childcare and early education programs, with states responsible for detecting and addressing fraud under federally mandated program integrity rules, according to the First Five Years Fund.

Federal officials, including the U.S. Department of Health and Human Services, made it clear that states are required to prevent and recover improper payments, leading to increased documentation requests and compliance reviews nationwide.