The Trump administration is freezing child care payments to Minnesota and demanding a comprehensive audit to identify any illicit activity in government programs, escalating a fight with the state over alleged fraud.

“We have frozen all child care payments to the state of Minnesota,” Jim O’Neill, the deputy secretary for the Department of Health and Human Services, said Tuesday in a post on X, citing allegations that the state “funneled millions of taxpayer dollars to fraudulent daycares” over the last decade.

O’Neill also demanded Democratic Minnesota Governor Tim Walz carry out a “comprehensive audit of these centers,” including “attendance records, licenses, complaints, investigations, and inspections.”

President Donald Trump and his administration have focused on allegations of fraud in the state, in particular cases involving people of Somali origin, and accused Walz of mishandling government funding. The scrutiny on Minnesota has intensified following a recent viral video that purported to reveal fraud in day-care centers.

Trump on his Truth Social platform on Wednesday, derided Walz as a “Crooked” governor. In a post that mocked U.S. Representative Ilhan Omar, a Minnesota Democrat of Somali origin, the president alleged that “Much of the Minnesota Fraud, up to 90%, is caused by people that came into our Country, illegally, from Somalia.”

“Send them back from where they came, Somalia, perhaps the worst, and most corrupt, country on earth,” he added.

Walz and his team have accused Trump of needlessly politicizing the issue instead of working to address concerns.

“This is Trump’s long game,” Walz said in an X post on Tuesday following O’Neill’s announcement. “We’ve spent years cracking down on fraudsters. It’s a serious issue - but this has been his plan all along. He’s politicizing the issue to defund programs that help Minnesotans.”

The moves by HHS follow an announcement by the U.S. Small Business Administration last week that the administration is halting $5.5 million in annual funding to Minnesota “pending further review,” citing fraud allegations involving government loans. The Trump administration has repeatedly sought to withhold funding to Democratic-run states and cities.

Trump and allies have seized on the controversy to target the status of Somali refugees living in the state, part of a broader immigration crackdown. The president last month said he was revoking temporary protected status for Somali refugees living in Minnesota. Earlier this week, Tricia McLaughlin, a Department of Homeland Security spokeswoman, said the administration is also auditing immigration cases involving migrants from certain countries — including Somalia — to determine if any individuals who obtained U.S. citizenship through fraud merit denaturalization.

“We’re also not afraid to use denaturalization,” White House Press Secretary Karoline Leavitt said Wednesday morning on Fox News, amplifying that threat. “That’s a tool at the president and the secretary of State’s disposal, and it’s one this administration has previously used before.”

Leavitt called investigating fraud allegations a “top priority for this administration,” and said other states were also on officials’ radar, such as New York and California, though she did not detail any other specific fraud claims.

“The Department of Homeland Security is conducting door to door investigations on the ground at potential fraud sites, and they are also, of course, conducting continued deportations of illegal aliens in Minnesota’s communities,” she added.

The Minnesota nonprofit Feeding Our Future was at the center of the largest pandemic relief fraud charged in U.S. history, according to the Justice Department. Dozens of individuals have been charged in connection with that case as of November.

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—With assistance from Magan Crane.

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