HHS Freezes Over $10 Billion in Child Care and Family Assistance Funds for Five States Citing Fraud Concerns

Federal Funds Frozen Amid Fraud Allegations

The U.S. Department of Health and Human Services (HHS) announced on January 6, 2026, that it has frozen access to more than $10 billion in federal child care and family assistance funds for five states: California, Colorado, Illinois, Minnesota, and New York. The decision, made by HHS's Administration for Children and Families (ACF), follows 'serious concerns about widespread fraud and misuse of taxpayer dollars in state-administered programs.'

Deputy Secretary Jim O'Neill stated, 'Families who rely on child care and family assistance programs deserve confidence that these resources are used lawfully and for their intended purpose.' He added that the action reflects a commitment to 'program integrity, fiscal responsibility, and compliance with federal requirements.'

Affected Programs and Financial Impact

The funding freeze impacts three critical programs overseen by the ACF:

• Child Care and Development Fund (CCDF): nearly $2.4 billion
• Temporary Assistance for Needy Families (TANF): $7.35 billion
• Social Services Block Grant (SSBG): $869 million

These programs are designed to support low-income families with child care costs and other essential services. The total amount frozen exceeds $10 billion, a move expected to affect hundreds of thousands of low-income households across the five states.

Nature of Fraud Concerns and New Requirements

HHS's ACF identified concerns that benefits intended for American citizens and lawful residents 'may have been improperly provided to individuals who are not eligible under federal law.' A senior Trump administration official also cited 'rampant fraud' and 'giving money to illegals' as reasons for the freeze.

Minnesota has been a particular focus, described as a 'catalyst' for the broader action, with ongoing investigations into alleged fraud schemes, including a $250 million COVID-era scheme involving a nonprofit called Feeding Our Future. HHS Deputy Secretary Jim O'Neill previously called it a response to 'blatant fraud that appears to be rampant in Minnesota and across the country.'

As a result of the freeze, the five states must now submit 'justification and receipt documentation' before any federal payment is released. This action amplifies ACF's recently activated 'Defend the Spend' system. Additionally, ACF has launched a dedicated fraud reporting portal at childcare.gov for the public to report suspected fraud.

State Reactions and Political Context

Governors of the affected states, all of whom are Democrats, swiftly condemned the HHS action. New York Governor Kathy Hochul called the decision 'vindictive' and 'cruel,' vowing to 'fight this with every fiber of our being' in court. Other Democratic leaders echoed this sentiment, accusing the Trump administration of using children as 'political pawns' in a dispute with 'blue state governors.'

California Governor Gavin Newsom's office defended the state's record on combating fraud. Officials in Illinois and Colorado indicated they had not received official notification of the funding changes beyond media reports. Minnesota Attorney General Keith Ellison is reportedly exploring legal options to prevent critical child care services from being abruptly cut.

The funding freeze comes amidst a broader context of the Trump administration's claims of fraud in federally funded programs, including previous actions against Minnesota's child care funding and threats to withhold SNAP food aid from Democratic-controlled states.