The State Auditor's office found 94 million dollars of federal welfare grants were misspent, wasted or converted for personal use. State Auditor Shad White says federal TANF dollars intended to help needy families were used without regard for legal spending requirements. He says department leaders fell into a pattern of misusing money after ignoring basic regulations.
“It’s easy to talk yourself into increasingly absurd expenditures over time. And by the time we got to FY19, we had seen an agency and some subgrantees spending money in completely unconscionable ways that we would not have imagined could be possible five years ago.”
The audit is part of an ongoing criminal investigation that has led to 6 arrests, including former DHS Director John Davis.
The report outlines several instances of misspent money, including using grant money to purchase 3 vehicles, each over 50 thousand dollars, awarded contracts and lump-sum payments that were made to family members of former director Davis, and a speeding ticket was paid using TANF funds.
Exerpt from Auditor's press release:
The audit’s formal finding is that over $94 million of that grant money has been “questioned,” meaning auditors either saw clear misspending or could not verify the money had been lawfully spent. Examples of questioned spending included:
• MCEC and FRC used TANF money to hire lobbyists with TANF money, which is unallowable, often with no paperwork describing the work the lobbyists were hired to do.
• MCEC awarded contracts to and hired former DHS Director John Davis’s family members, sometimes paying them up front in lump sums.
• MCEC and FRC paid large sums to wrestlers Ted Dibiase, Ted Dibiase, Jr., and Brett Dibiase for work that was not performed, for unreasonable travel costs, or with little proof the programs helped the needy.
• MCEC and FRC used TANF money to fund religious concerts with no proof they benefitted the needy.
• MCEC made multiple donations with TANF money—like donations to the American Heart Association, the Mississippi Highway Patrol, booster clubs, pageants, universities—and provided no proof the donations were used to help the needy. FRC also made unallowable donations.
Among the grantees, MCEC was particularly dependent on TANF funding and engaged in extensive misspending. From 2016 to 2019, MCEC was given over $60 million in grants from DHS, while raising just under $1.6 million from other sources. Examples of questioned spending at MCEC included:
• MCEC paid Victory Sports Foundation TANF money for fitness programs for Mississippi legislators and other elected officials/staffers at no charge.
• MCEC purchased three vehicles with grant funds, each for over $50,000, for Nancy New (Director of MCEC), Zach New, and Jess New. MCEC also paid salaries, cell phone bills, and other costs for a variety of members of the New family.
• MCEC made many unallowable sports-related expenditures—like sponsoring a college baseball tournament—for services that could not be proven to benefit the needy. Some sports-related spending was for services that were not actually performed.
• MCEC transferred over $6 million to a private school and organization owned by Nancy New and also purchased curricula and supplies with TANF funds for the school.
• MCEC paid a speeding ticket for Nancy New with TANF funds.
• MCEC issued a $3,000 check to the bookkeeper of MCEC with a handwritten note saying the payment was actually for John Davis.
• MCEC paid a variety of consultants, including Jess New, for no clear deliverables or where there was no proof the spending met TANF requirements.
• Zach New took a loan out against his MCEC retirement plan and repaid the loan with TANF money.
• MCEC paid for extensive unallowable advertising, like using TANF money to advertise at the NCAA basketball tournament and a college football bowl game. TANF money was also used to purchase tickets to a college football game.
• MCEC paid excessive rent well above market value to a holding company owned by Zach and Nancy New. Sometimes the rent paid for spaces that were not used for TANF-related purposes.
Bob Anderson, the newly appointed Director of DHS, says the department has implemented new checks and training for how money can be spent. He says that includes rewriting the manual for subgrantees, doing risk management before grants are awarded, and hiring a director for the new Office of Compliance within DHS.
“She will be working with our subgrantees and with our quality control staff to make sure that that culture of compliance permeates throughout the entire agency. That’s my commitment to the state of Mississippi, and that’s the work that we’re about at the Department of Human Services.”
Anderson says former director John Davis was using the money as if it were his own. The criminal investigation into the misuse of the funds is still ongoing.
