What did the 2019 Office of the Legislative Auditor find about Minnesota child-care fraud?
Executive summary
The Office of the Legislative Auditor’s March 5, 2019 special review concluded that Minnesota’s Child Care Assistance Program (CCAP) was vulnerable to fraud because state controls were insufficient to prevent, detect, and investigate improper payments, and while evidence pointed to a sizable problem the auditor could not substantiate the most extreme public estimates (such as $100 million a year) nor prove claims that CCAP fraud dollars funded terrorist groups [1] [2] [3]. The report documented proven criminal cases totaling only a few million dollars but warned that fraud is difficult to quantify and recommended stronger oversight and investigative capacity [3] [1].
1. The audit’s core findings: controls were inadequate and left CCAP exposed
The auditor reviewed eligibility, licensing, provider payments and fraud investigations and found multiple deficiencies in DHS policies and MEC2 system controls that left attendance and payment data vulnerable to manipulation, with county and state oversight processes often inconsistently applied or too weak to reliably validate claims [1]. The report concluded DHS’s internal controls “were insufficient to effectively prevent, detect, and investigate fraud in Minnesota’s Child Care Assistance Program,” documenting lapses in documentation, override monitoring, and sample-review practices that undermined confidence in payment integrity [1] [2].
2. Proven fraud was limited but likely understates the problem
Investigators and prosecutors had proven cases that recovered roughly $5 million to $6 million over several years, a small fraction of program dollars, but the auditor and its investigators believed those prosecutions likely understate the true amount because fraud is often hard to detect and prosecute [3]. The Office of the Legislative Auditor stressed the difference between what has been criminally proven and what audit evidence suggests: patterns and system weaknesses indicate fraud opportunities and probable improper payments, yet converting that into a reliable statewide dollar estimate proved “extremely difficult” [3] [4].
3. The most explosive claims — $100M and terrorist links — were unproven and speculative
Following media and whistleblower claims that CCAP losses approached $100 million annually or that stolen funds were being sent overseas to support groups like al‑Shabab, the auditor explicitly found those assertions unsubstantiated by the evidence it reviewed; while noting it was theoretically possible that fraud money could be moved abroad, the report did not find documentary proof linking CCAP fraud to terrorist financing and described such links as speculative [3] [2] [5]. The auditor therefore rejected the most inflammatory public narratives while still warning of meaningful vulnerabilities in program integrity [3] [2].
4. Structural problems identified and recommended fixes
The report cataloged specific operational weaknesses — inconsistent county reviews of MEC2 override reports, sampling practices that left review subject to self‑selection, inadequate attendance verification, and limited investigative resources — and recommended stronger validation procedures, better data controls, and enhancements to DHS’s fraud detection and referral processes [1]. Historical context in the report noted Minnesota had an investigatory team since 2013 and subsequent reforms would later shift licensing and oversight structures, but auditors emphasized the need for sustained improvements in monitoring and electronic attendance reporting to reduce overpayments [6] [1].
5. Aftermath, politics and how the audit was used
The 2019 audit has been cited repeatedly in later political fights and media cycles — sometimes to argue that fraud was rampant and sometimes to show that alarmism exceeded the evidence — with state officials using the report both to justify reforms and to push back against exaggerated claims; federal and state responses since then have included tightened oversight, new laws criminalizing kickbacks, and additional audits, while critics note prosecutions remain limited and systemic attendance errors persist [7] [5] [8]. The audit therefore functions as a sober, evidence‑based middle ground: it documented real control failures that enabled fraud, limited the most extreme public claims, and framed a path of reforms while acknowledging the practical difficulty of quantifying total improper payments [1] [3] [2].