Fraud investigation triggers funding freeze for daycare providers in multiple states

FOX23 News at 9 p.m.

MISSOURI (KBSI) – Missouri daycare providers have taken several hits this year when it comes to federal subsidy funding, and now after a federal fraud investigation into a daycare facility who allegedly gained around 1 billion dollars through a fraudulent daycare scheme that started during the pandemic in Minnesota there’s another payment freeze. 

In Missouri, families and daycare providers are watching closely after a pause in recent subsidy, daycare funding by the Trump Administration following fraudulent allegation investigations. 

Angela Hahn is the owner of  Learn.Play.Grow. LLC daycare in Jackson Missouri she shares what daycare owners are seeing in Missouri right now.

“We got an email stating that it was not going to impact Missouri, that Missouri has I forget exactly how they stated it, but pretty much just a really good standpoint to protect them against fraud and then I never personally got the second email about four days later. Thank goodness I’m in a couple of Missouri daycare groups because that’s how I found out unfortunately about the funding hold.” 

According to the US Department of Health and Human Services they are rescinding a series of Biden-era childcare rules that required states to pay providers before verifying any attendance and before care was delivered. The change will roll back provisions in the 2024 childcare and development fund rule that the department says weakened oversight and increased the risk of fraud in federally-funded state childcare — including programs now under investigation in Minnesota. 

 “I was excited about the payment based off of enrollment, not attendance” says Hahn. “It would have helped our parents quite a bit because, like, we have some kiddos, like, last month we had a kiddo that was sick quite a bit that’s on subsidy, and the parent is now going to have a big bill because she missed that five paid absent days.” 

Currently daycare providers must turn in attendance records for every subsidy child each month, under the new rules that were supposed to start in 2026 enacted by Bidens Administration providers would no longer have to provide a daily attendance log. After speculation of possible fraudulent daycares in Minnesota.

Trumps Administration is reversing that rule before it even starts, saying that it creates a loophole for fraud, so those attendance changes will not be enforced for 2026.

 “We need childcare desperately in Missouri, especially small towns, small daycares where you get that one on one with the kiddos, and not just a big 200 kid plus facility, which those facilities are great, but the smaller facilities are also needed, and they’re going to end up shoving us out and closing our doors if they cannot pay us” says Hahn.

Although DESI sent an email to providers saying the fraud prevention freeze will not directly affect Missouri, there is currently a freeze on subsidy payments, it is unclear if it directly related to the fraud prevention freeze investigation.

This marks at least the second time in 12 months that providers in Missouri have seen a delay on payments, the last one was seen throughout the state because of a new system switch and technical issues.

 “There were so many daycares, unfortunately, that shut their doors down due to subsidy not paying them” says Hahn. “I’m reading just today and yesterday in those groups that there’s several other places that are going to be shutting their doors, unfortunately, because they cannot continue to not receive money.”