A shuttered St. Paul daycare collected more than $11.8 million in taxpayer-funded childcare assistance between 2017 and 2026, even though state and nonprofit compliance workers flagged suspicious activity at the site as far back as 2018. Newly unsealed search warrants describe investigators finding just five children in attendance during a raid on Diamond Daycare, located on Lexington Parkway North, despite the center's outsized billing to Minnesota's Child Care Assistance Program.
According to 5 EYEWITNESS NEWS, the Minnesota Bureau of Criminal Apprehension executed multiple search warrants at Diamond Daycare last month, collecting phone records, bank statements and years of surveillance video as part of the fraud investigation. Agents reportedly found the center nearly empty, and a Diamond Daycare employee was described as evasive and dishonest when asked why there were no children present. The station reports that Diamond Daycare's owner directed parents to list a fake business as their employer so their children would qualify for the subsidy, and that a majority of parents with kids enrolled at Diamond listed a fake employer on their work verification forms.
CCAP applicants must document current employment, active job searching, school attendance or participation in a jobs program to qualify, but the falsified work verification forms made ineligible children eligible for the funding, per the same report. Court filings reportedly do not specify how much of Diamond's $11.8 million in CCAP revenue traces directly to those false work verifications. The station's report also notes that a suspected fraud participant told the FBI and the U.S. Attorney's Office that Diamond's owner was the ringleader of the scheme, and that the owner directed that participant to open a bogus business of their own.
Warnings Dating Back to 2018 Went Unheeded
The suspicious activity at Diamond Daycare was not a recent discovery. A St. Paul police sergeant reportedly found the daycare vacant back in 2018, the same year a Department of Human Services tip claimed multiple parents enrolled at Diamond were working janitorial services at the same location, according to the outlet's report. The Greater Twin Cities United Way, which was selected to administer early learning scholarships statewide, reported similar concerns to the Department of Children, Youth and Families in August 2025 after a compliance visit found no signs of operation at the center, and the daycare's buildings reportedly appeared vacant, with lights off and windows covered, with no one responding during posted business hours.
The state froze CCAP payments to Diamond shortly after BCA agents found only five children in attendance, though no charges have been filed against the daycare's owner as of the warrants' unsealing. Diamond Daycare is no longer listed on Minnesota's childcare licensing lookup. State licensing records identify Diamond Day Care at 460 Lexington Parkway North, while KSTP reports that Champion Child Care LLC is operating in Diamond's former location.
A Broader Crackdown on Taxpayer-Funded Daycares
Diamond's case is one thread in a much larger enforcement push. State and federal investigators served search warrants at nine Minnesota daycare centers in April, and those nine centers collectively received $67 million in CCAP funds over the past eight years, per the station's reporting. The Department of Children, Youth and Families is separately investigating more than 400 taxpayer-supported daycares.
Federal prosecutors have already brought charges against a childcare provider accused of defrauding CCAP, the outlet notes, and that enforcement wave has produced convictions. Fahima Mahamud, owner of Future Leaders Early Learning Center — Minnesota's top CCAP funding recipient in 2025 at $3.7 million — pleaded guilty in July 2026 to defrauding CCAP out of $4.6 million and stealing $850,000 from the Feeding Our Future meal program, according to CBS News. Mahamud notified the state that the center was closing and booked a flight to London that same day, the outlet reported.
Attendance Fraud Is a Known, Documented Weakness
The vulnerabilities exposed at Diamond Daycare echo warnings that go back years. A federal audit published in May 2025 by the HHS Office of Inspector General estimated that 11 percent of all payments made to 1,155 licensed Minnesota childcare centers under CCAP in 2023 contained attendance or payment errors, after auditors sampled 200 payments and found 38 non-compliant. Long before that, CCAP attendance requirements had also been subject to state review.
DCYF has since begun implementing an electronic attendance system for taxpayer-funded childcare facilities, requiring an initial group of licensed centers to submit attendance data through the state's Provider Hub. The system offers three methods for centers to submit attendance records using real-time data, but the initial rollout included less than 10 percent of providers enrolled in CCAP, per 5 EYEWITNESS NEWS. New Horizon Academy Chief Financial Officer Penney Allen, whose company is Minnesota's largest childcare provider, said the manual import method still leaves the system open to exploitation because it allows users to alter records before submission. “It's not a real online system. It's an after-the-fact attendance system,” Allen said.
New Laws Target Fraud, But Funding Fights Continue
Lawmakers have also moved to close legal gaps, according to legislative updates from the Minnesota Senate DFL. State budget documents also discuss limits on receiving public funds.
DCYF issued a program update, according to a bulletin distributed via GovDelivery. Investigators say altered or missing attendance records have repeatedly resulted in fraud, abuse or errors in CCAP payments, and a DHS attendance audit has been examining numerous daycares receiving high amounts of CCAP funds as the broader crackdown continues.
