Texas reviewed its child care spending after allegations of a large fraud scheme in Minnesota, and state agencies said they found little fraud in Texas, according to a report released in February. The review was ordered by Gov. Greg Abbott after the Minnesota claims sparked a federal funding freeze affecting child care funding in five states. Abbott’s request reflected concerns about improper payments, which the state describes as payments made in an incorrect amount or payments that are fraudulent.
In announcing the findings to accompany the report, Texas officials pointed to the state’s safeguards against improper payments and said the state’s rate remains extraordinarily low compared with other states. Abbott’s press secretary, Andrew Mahaleris, said the report confirmed Texas “maintains strong anti-fraud measures that have kept improper payments extraordinarily low compared to other states,” and that Abbott would continue to enhance oversight, fraud-reporting tools, and enforcement to ensure taxpayer dollars serve their intended purpose.
The backdrop to Texas’s review was a sequence that began with allegations in Minnesota. In December 2025, a YouTuber, Nick Shirley, posted a video alleging that child care centers in Minnesota run by Somalians had defrauded the state government of more than $110 million through child care programs; the cluster says experts told the AP that the Minnesota allegations in December were unfounded. The federal response was nevertheless swift: in January, the U.S. Department of Health and Human Services froze access to multiple funding streams used to subsidize child care in five states, including Minnesota.
The federal pause also widened pressure on state systems to confirm their fraud-prevention procedures. Child care advocates said those fears can create a second problem: tightening requirements beyond what is needed to address confirmed fraud can make it harder for providers—many already operating as small businesses—to participate effectively. Radha Mohan, executive director of the Early Care and Education Consortium, said, “While you do want to address the issue (of fraud), you also don’t want to over-correct and create issues where they currently do not exist.”
Texas’s report lays out how Abbott directed the state’s two major child care oversight bodies to check whether Texas had issues similar to those alleged elsewhere. The report says Abbott issued six directives to the Texas Workforce Commission and the Texas Health and Human Services Commission to assess the adequacy of data-collection efforts, identify high-risk providers, ensure provider data about children receiving scholarships is accurate, ensure oversight is applied uniformly across Texas, improve the online fraud reporting portal, and submit fraud investigations to state or federal prosecutors when necessary.
The agencies said the review examined about 7,500 child care providers that accept child care scholarships and flagged 125 as high risk. The report describes additional prevention measures such as regular in-person assessments, an attendance tracking system, and a hotline and online portal for fraud allegations, along with a quick response by state boards. It also said the program has been built upon safeguards since 2011 and that those measures have reduced improper payments over time, while noting that the latest improper payment rate remains far below what advocates and analysts say many states experience.
Texas also tied its findings to improper-payment metrics submitted to federal regulators. The report says Texas’s improper payment rate was .44%, equivalent to about $4.3 million of the more than $990 million in the budget referenced in the last report and that the program’s improper-payment rate was based on federal improper payment reporting. It also said a national average for improper payments in the same program was 3.96%.
Beyond the question of whether fraud occurred, the report described what comes next—changes intended to reduce the chance of improper payments while addressing staffing and reporting requirements for child-care providers. As part of its follow-up, Texas began creating a monthly report listing high-risk providers to watch, added training opportunities for local fraud investigators, and increased requirements related to how providers track attendance. The report also said Texas started enhancing data sharing between state agencies for programs receiving child care scholarships and that local boards will be required to withhold funding from parents who owe the state money.
Some advocates argued that additional requirements could create “unfunded mandates” and complicate provider operations without improving fraud prevention. Kim Kofron, director of early childhood education with ChildrenatRisk, said the public discussion following Minnesota was “very delicate” and that “In Minnesota, there really wasn’t fraud. There were inconsistencies and errors — but that’s not fraud.” Sherry Durham, senior director of child care for Workforce Solutions of Deep East Texas, said the state’s safeguards make sense, adding that child safety comes first and that the state should act as a steward of federal funds.
Kathlyn McHenry, director of state government relations for the Early Care and Education Consortium, said Texas’s decision to require all providers to use one child care management system would remove provider choice, and she warned it could operate as an unfunded mandate. McHenry said providers previously could use systems best suited to their families and structures, and that the new requirement could make compliance harder without an indication that it would prevent additional fraud. The Texas Senate Health and Human Services Committee is seeking public recommendations on fraud prevention in the child care and Medicaid systems, with a meeting scheduled for 9 a.m. April 8 in a committee location at the Capitol Extension Office.