Texas Governor Greg Abbott directed state agencies on January 4, 2026, to launch a comprehensive investigation into potential fraud within the state’s Child Care Services Program, following revelations of widespread abuse in Minnesota’s taxpayer-funded childcare system that federal prosecutors estimate could exceed $9 billion in losses.
Two Agencies Tasked with Fraud Prevention Mission
Abbott sent a formal letter on Monday to Texas Workforce Commission Chairman Jose Esparza and Texas Health and Human Services Commission Executive Commissioner Stephanie Muth, instructing both agencies to implement enhanced anti-fraud measures and investigate any potential misuse of taxpayer dollars, according to the governor’s official statement. “Recently, the Trump Administration and independent journalists have uncovered potential systematic fraud in subsidized child care systems in states like Minnesota,” Abbott stated, as reported by CBS News. “Such fraud will never be tolerated in Texas.”
The agencies must submit a progress report by January 30 and deliver final findings by February 27, outlining their implementation of anti-fraud measures and results of their investigations, FOX News reported.
Texas Boasts Lower Fraud Rate Than Minnesota
Abbott noted in his directive that Texas already maintains significantly stronger fraud prevention systems than Minnesota, with an improper payment rate of just 0.43 percent compared to Minnesota’s approximately 11 percent rate, according to FOX 7 Austin. Despite this relatively strong performance, the governor emphasized that “more can be done to protect Texas children and taxpayers,” as stated in his letter.
The Texas Workforce Commission responded immediately to the directive, telling Fox News Digital that “TWC is taking immediate action to implement the actions outlined by Governor Abbott, which will strengthen the agency’s current fraud prevention efforts”. The agency added that it remains “dedicated to continuing to root out waste, fraud, and abuse that might occur despite our strong fraud protections.”
Enhanced Oversight Measures Target High-Risk Providers
Abbott’s directive requires the agencies to identify high-risk providers participating in the Child Care Services Program and conduct additional site visits, according to CBS News. The commissions must also review current data collection efforts related to the program and ensure all providers are “accurately and verifiably reporting the number of children enrolled,” KERA News reported.
Additional measures include conducting reviews of oversight processes for Local Workforce Development Boards to verify uniform program standards and enhancing access to the state’s online portal and hotline so Texans can easily report suspected fraud instances, according to the governor’s office.
Minnesota Scandal Triggers National Response
The investigation follows explosive allegations triggered by a viral video produced by YouTuber Nick Shirley, which claimed numerous Minneapolis-area daycares were fraudulent fronts that defrauded the Minnesota government of tens of millions of dollars, KFOX reported. Shirley’s video, which drew tens of millions of views, showed him visiting federally supported child care centers around Minneapolis and finding no children present at several locations.
However, subsequent investigations revealed a more complex picture. Minnesota’s Office of Inspector General conducted on-site compliance checks at nine centers and confirmed they were “operating as expected,” with eight facilities having children present during inspections, CNN reported. CBS News’ independent review found dozens of citations related to safety, cleanliness, equipment, and staff training at various facilities, but “no recorded evidence of fraud”.
A May 2024 federal audit by the Department of Health and Human Services’ Office of Inspector General had identified deficiencies in Minnesota’s attendance tracking, examining 200 randomly selected payments from 2023 and finding attendance-related issues in 38 cases, according to FOX 7 Austin. Federal auditors estimated that 11 percent of all payments likely contained flaws, potentially affecting $231.4 million in child care claims across more than 1,150 providers.
Trump Administration Freezes Minnesota Funding
In response to the Minnesota controversy, the Trump administration announced it is pausing federal funding to child care programs in Minnesota, with President Trump calling the state a “hub of fraudulent money laundering activity,” CBS News reported. The scandal contributed to Minnesota Governor Tim Walz’s decision to suspend his reelection campaign amid allegations that the state attempted to cover up widespread fraud in social programs.
Abbott concluded his statement by emphasizing his administration’s commitment to accountability: “Schemes like the ones uncovered in Minnesota harm taxpayers as well as other families and children waiting to participate in the Child Care Services Program,” the governor stated, according to CBS News. “Waste, fraud, and abuse of taxpayer dollars will not be tolerated and will be punished to the fullest extent of the law in Texas.”