Tennessee Comptroller: $11.4M in questionable DHS costs
The Department of Human Services is again under scrutiny, after a third audit in two weeks by the Comptroller revealed widespread management problems — and $11.4 million in questionable spending in the last fiscal year.
Most of the spending questioned in Tuesday's audit involved food programs for low-income kids. The programs have been pored over by lawmakers and the U.S. Department of Agriculture, and have been the subject of an ongoing Tennessean investigation. Last week, the Comptroller issued two separate reports on private agencies now under criminal investigation for pocketing tens of thousands of dollars in food program funds that never made it to children.
The $80 million food program is intended to provide meals and snacks to kids who lack access to nutritious food in Tennessee, where one in five children is at risk for hunger. The funds come from the federal government, but DHS is responsible for overseeing the programs. DHS contracts with private agencies, providing the money for food purchases distributed in child care centers, after-school and recreational programs.
Tuesday's audit called into question more than 10 percent of the food program's annual operating budget, based only on a review of a small sample of private agencies participating. The audit described multiple violations of federal regulations and basic accounting practices, including a lack of documentation for monies spent on food, a lack of verification that the agencies DHS contracts with are eligible to participate in the food programs and staffing shortages at DHS that threatened its ability to provide oversight and prevent potential fraud, waste and abuse.
In several examples cited in the audit, DHS provided cash advances for food purchases to agencies that never requested them. In one example, DHS provided a $311,993 cash advance to an agency whose entire annual operating budget was $124,000. In another example, an agency receiving an un-asked-for cash advance said it was waiting for DHS to ask for it back.
The audit places responsibility for the oversight failures on DHS management, including its commissioner, Raquel Hatter.
Hatter — through spokeswoman Stephanie Jarnagin on Tuesday — declined an interview request. Hatter refused a subsequent request to be interviewed at any time during the rest of the week. Jarnagin said instead that she, as the agency spokeswoman, would take questions or issue a statement.
On Tuesday evening, Jarnagin sent a statement from DHS that said, in part: "It is important to note that while State Audit has questioned costs in their findings, it does not mean that the questioned costs are specifically the result of fraud, waste or abuse."
But in its written responses to the findings in the audit, DHS took little responsibility for the problems, blaming private agencies for failing to keep track of paperwork and a former employee for the cash advances. DHS also disagreed with many of the questioned costs, saying it is up to DHS management and the federal government to ultimately investigate and determine questioned costs — not the Comptroller. DHS criticized the state audit for questioning costs "based on procedural matters not based on whether children and families received the (food program) benefits."
In a written response included in the audit document DHS said the department's oversight was, in fact, improving, providing a lengthy list of steps that include adding auditors, creating an internal task force to update training materials, recently approving the procurement of audit documentation software, and adding online training.
And DHS noted that auditors questioned entire payments to agencies when paperwork wasn't in order, even when those agencies may have provided food.
The department's response also noted that the DHS had "historical problematic practices that may not be readily identifiable" and that a 2011 "Top to Bottom" review was the first step.
2 Tennessee agencies accused of pocketing thousands intended for hungry kids
Yet the problems have only emerged in recent years under the leadership of DHS head Hatter, who took office in 2011 — and $11.4 million in questioned payments is unprecedented for the longtime food programs.
And last week, the Comptroller released two separate reports on DHS food contractors that have since been turned over to law enforcement after findings that included fraudulent paperwork and one contractor who spent thousands of dollars on home improvements and dining out, instead of feeding children.
State Sen. Steve Dickerson, a Nashville Republican, called those investigations "disturbing" and said he planned for lawmakers to review them in a hearing next week.
In response to the failures of the DHS food program, lawmakers are now weighing a measure to place DHS under tighter financial reins.
Proposed legislation from state Sen. Jim Tracy, a Shelbyville Republican, would require reports to lawmakers every three months on the food programs by DHS. The measure received unanimous approval in the Senate and is making its way to the House for a vote Thursday. The measure would also require agencies who participate in the food program to have a performance bond to guarantee if money is misspent, the state can be reimbursed.
"The concern is just making sure the money is going where it is supposed to be going and making sure there is accountability there," Tracy said. "It is very very important that money goes to recipients who deserve this."
Tuesday's audit, a 500-page review of all state agencies receiving federal funds, found DHS accounted for 34 of 72 major problems identified across state government. DHS runs more federal programs than any other state agency but has not in the past had so many problems identified.
The story so far:
- Auditors with the Comptroller found no problems in DHS’ food programs before 2012.
- By 2013, auditors were questioning $4.3 million in suspicious payments to food providers.
- March 2015: the Comptroller uncovered $1.8 million in questionable payments.
- July 2015: A Tennessean investigation found child food program failures were costing taxpayers millions. One food program contractor paid herself and her two adult daughters tens of thousands of dollars in bonuses and spent food program money on home improvements.
- July 2015: The former head of the DHS food program resigned following Tennessean reports into misspending and reported to federal authorities that a lack of oversight by DHS was placing children at risk for hunger. The former director reported DHS Commissioner Raquel Hatter ignored her requests for additional staff and training.
- August 2015: Lawmakers question Hatter.
- September 2015: A Tennessean investigation found that unscrupulous contractors who bilked similar taxpayer-funded programs in other states had little problem moving to Tennessee and becoming DHS contractors, receiving hundreds of thousands of dollars in food program funds that, in some cases, never reached hungry children.
- February 2016: Federal authorities reviewing management of DHS food programs found multiple incidents of lax oversight, including a failure to fire contractors who violated program rules, a failure to recover over-payments and a failure to scrutinize how the money was spent. The review by the USDA also found a lack of adequate level of staffing to properly oversee the program.
Crooked agencies find it easy to dupe TN's child food programs