Independent journalist Nick Shirley released a video last month alleging $170 million in fraud within California's state-funded daycare system. He and his team visited multiple licensed facilities in Los Angeles and San Diego counties, finding empty buildings, graffiti-covered structures, and no children present despite official enrollment records showing dozens of kids.

Shirley used public records from the California Department of Social Services, Centers for Medicare & Medicaid Services, and state fiscal reports to identify these 'ghost' daycares. In San Diego, one shopping plaza site listed 39 children enrolled, but investigators observed only about five, with nearby buildings closed and a large dumpster present. Its backup facility, UMI Learning Center, had been convicted in 2024 of billing for 150 nonexistent children.

At Hayder Sahra Family Child Care, records indicated 14 enrolled children, but none were present, children's files were missing, and no roster existed. When Shirley knocked pretending to enroll a child, a woman inside yelled in Somali, referencing scrutiny in Minnesota. Another site had two unsupervised children outside who confirmed no adults were present.

In Los Angeles' Van Nuys neighborhood, Shirley linked daycare issues to a broader pattern including hospice fraud highlighted by Dr. Mehmet Oz. Empty strip-mall storefronts and homes were registered as active providers billing programs like CalWORKs and CCAP. State spending on daycare and related services has surged 1,000% in some areas amid stable population growth, with Los Angeles County accounting for 10% of U.S. home healthcare expenditures.

Shirley stated, 'California may have the largest amount of fraud in the country,' noting Medi-Cal's budget doubling from $108 billion in 2022 to a proposed $222 billion in 2026. He observed luxury cars like Mercedes and Teslas in parking lots of suspect sites, calling it 'welfare maxing' with no consequences.

Governor Gavin Newsom dismissed the video as 'political cosplay' and accused Oz of racial profiling in hospice claims, pointing to California's 2021 moratorium on new hospice licenses and revocation of over 280 since then. The state has pursued more than 100 criminal cases related to such fraud. No specific response addressed Shirley's daycare findings.

The allegations follow federal actions. In January, the Department of Health and Human Services froze child care grants to California and four other states over fraud concerns, prompting lawsuits from state attorneys general. President Trump announced a fraud crackdown yesterday, appointing Vice President JD Vance as czar and noting arrests in a separate $50 million Medicare hospice scheme in Southern California dubbed 'Operation Never Say Die.' Eight individuals, including nurses and a psychologist, face charges for billing sham facilities.

Federal officials have not confirmed investigations into Shirley's specific daycare sites, but the video has amplified calls for audits amid California's high taxes and welfare spending.