West Midlands Police have carried out a series of searches in Handsworth and Lichfield as part of an investigation into the management of a nursery in Birmingham.
The nursery, 'Kare Babies' in Hamstead Road, Birmingham, has been closed for the day.
A 26-year-old woman from Lichfield has been arrested on suspicion of fraud offences.
The investigation has been carried out in partnership with Ofsted.
A police statement explained that the decision to close the nursery was made to "minimise disruption to the children, ensure the safety of all children who attend the nursery and to assist the investigation".