Alleged Minnesota childcare fraud schemes prompt calls for new oversight systems

Alleged fraud schemes plaguing Minnesota’s social services systems have elevated scrutiny surrounding childcare centers. 

But fraud can be challenging to identify for states – especially when agencies are using outdated systems that make it difficult to spot trends and red flags that could point to potential fraud, according to Chris Bennett, the CEO and founder of a Wonderschool, a platform that provides technology support to child care providers and states. 

“When you have all this data living in different place, it’s really difficult for a state to identify where there is risk and where there is fraud,” Bennett recently told Fox News Digital during an interview. “Additionally, a lot of states are using pen and paper still to collect information. So it makes it really difficult for an administrator and the administrator’s team to go through all of that and make sure that they’re keeping up with things on a regular basis.”

Streamlining systems is key to identifying any atypical trends in billing behavior and attendance data that could point to fraud, Bennett said.

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“The best practice is moving to a modern system, moving to a system where all of the data is in one place and it’s all connected,” Bennett said. “So you can use that to identify risk, flag unusual patterns early, and then have humans go and investigate. Oversight should support child care providers, not punish them.” 

To help do this, Bennett spearheaded Wonderschool Oversight in January – building upon Wonderschool’s existing partnerships with states including Florida, Michigan and Illinois – that aims to centralize state agencies’ program data to evaluate enrollment, attendance, billing and licensing information in the same place. 

Having this information in one spot allows for Wonderschool Oversight to flag unusual patterns that could require human review, Bennett said.

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“For example, we can analyze daily attendance data to flag cases where billed attendance exceeds recorded attendance,” Bennett said. “We review billing behavior for anomalies — such as sudden spikes in billing corrections — which can indicate potential issues. Or, in another example, we compare reported attendance against licensed capacity, age-band limits, and required staffing ratios to surface possible regulatory or safety violations.” 

Childcare fraud has come under a microscope after right-wing influencer Nick Shirley shared a video in December detailing alleged fraud involving Minnesota childcare and learning centers. 

The Department of Health and Human Services (HHS) announced in January that it would put a hold on access to some federal childcare and family assistance funding for five states – including Minnesota – due to “serious concerns about widespread fraud and misuse of taxpayer dollars in state-administered programs.” 

Days later, a federal judge temporarily blocked the Trump administration from halting the funding freeze for at least two weeks. Fox News Digital reached out to HHS for comment. 

That’s not the only alleged fraud scheme the state is facing. Lawmakers have spearheaded investigations into Minnesota’s alleged “Feeding Our Future” $250 million fraud scheme that allegedly targeted a children’s nutrition program the Department of Agriculture funded and that Minnesota oversaw during the COVID-19 pandemic.

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At least 77 people have been charged in that scheme, which took advantage of the U.S. Department of Agriculture’s decision to waive certain Federal Child Nutrition Program requirements.

Likewise, another alleged fraud scheme in the state stems from the Housing Stability Services Program, which allegedly offered Medicaid coverage for housing stabilization services in an attempt to help those with disabilities, mental illnesses and substance-use disorders receive housing.