Anita Wadhwani and Stephanie Ingersoll

The (Nashville) Tennessean

NASHVILLE — Two agencies under the oversight of the Department of Human Services are the subject of criminal probes over allegations they misappropriated hundreds of thousands of dollars in public funds intended to provide food and snacks to low-income children, according to investigations by the Tennessee comptroller.

Patsy Simpson, the former executive director of the Cherry Tree Food Program in Clarksville, spent more than $56,000 on renovations and maintenance of her Clarksville home, including a $38,000 gazebo, new windows, vinyl siding, tile floors and other renovations, the investigation found. Simpson spent thousands more on gas, restaurants and retail stores. In total the investigation questioned $181,135.59 spent by Simpson and her agency between Oct. 1, 2012, and June 30, 2015.

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While Simpson was allegedly spending food program monies on home repairs and dining out, the operator of a different Clarksville in-home day care was maxing out her credit cards and forgoing Christmas presents for her own children to buy meals and snacks for the low-income children from military families she cares for up to 12 hours per day. The expected $1,200 in monthly reimbursements for the food from Cherry Tree never came.

"How can someone take from a program that's designed to help give nutritious food to little children," said Raelene Gilbert, owner of Little Rugrats day care and a single mother to five children of her own. "I'm angry. I care for kids from 6 a.m. to 6 p.m. most days, and of course I have to feed them.

"I hope they handcuff her (Patsy Simpson) and put her in jail for the rest of her life, not because of what she did to providers, but to kids."

Gilbert's anger is directed at the owner of Cherry Tree. But on Wednesday, the comptroller laid much of the blame on the state Department of Human Services, which has been called to account for its management of an $80 million program intended to address food needs in the deepest pockets of poverty across the state. The comptroller also noted a lack of oversight by the agency's board of directors.

The department and its commissioner, Raquel Hatter, have come under scrutiny by lawmakers after an audit by the comptroller last year questioned millions in spending on the food program, and a subsequent investigation by The Tennessean found that unscrupulous contractors who had committed fraud in other states were accepted into DHS programs that contract with agencies to distribute food. The head of the food program resigned in July, reporting to federal authorities that there was a lack of staff and training to properly oversee the program.

DHS contracts with agencies that serve as middlemen such as Cherry Tree Food Program, who process the paperwork submitted by child care centers to reimburse them for food bought for eligible children. DHS also contracts in some cases directly with child care centers such as Nashville Academy for Kidz. DHS issues payments based on the documentation provided for meals and snacks given to children. It also bears the responsibility for overseeing fraud, waste or abuse in those programs.

"The Tennessee Department of Human Services and Cherry Tree’s board dropped the ball in this case,” Comptroller Justin Wilson said in a news release. “DHS and the board should have reviewed disbursements to ensure they conformed to the approved budgets. A lack of oversight allowed these problems to continue for more than 2 1/2 years.”

A spokeswoman for DHS disputed that criticism on Wednesday, saying the expenditures had not been approved by DHS, and that DHS had already identified many of the issues in the comptroller's report on its own and was in the process of "correcting Cherry Tree and it closed in lieu of termination by the department."

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DHS "takes oversight and monitoring seriously and will continue to work with our partners at the state, local and federal level," spokeswoman Stephanie Jarnagin said. "We respectfully disagree with the conclusion (DHS) is not providing proper oversight."

Through a spokeswoman, Gov. Bill Haslam on Wednesday expressed confidence in Hatter.

A separate comptroller investigation released Wednesday questioned more than $83,000 in spending by Nashville Academy for Kidz, a for-profit child care center that participates in the food program. The investigation concluded that "the Tennessee Department of Human Services failed to provide adequate monitoring."

The second comptroller investigation alleged that Academy for Kidz staff falsified records to receive the maximum amount allowable to buy food for children who may not have been in attendance.

The report called "implausible" agency record-keeping that noted 100 percent attendance for the period state auditors reviewed, infants listed as receiving food when children that young do not consume the meals and snacks provided by the program, as well as other discrepancies.

The agency failed to turn over all requested bank statements. Its director told investigators that the food program funds were commingled with her personal bank account. And, in at least one case, the investigators found the agency used food program funds to purchase dog food.

The comptroller reviewed DHS' notes from an unannounced visit to the Academy for Kidz in November 2014. In that month, the child care center claimed, and was paid for, 46 lunch meals — which would reflect perfect attendance by all 46 enrolled pre-school children. Most of the sign-in sheets were photocopies of the same document with the dates altered at the top of each sheet. And there were sign-in sheets dated on Sundays — when the center was closed.

"We found no attempt by DHS staff to reconcile actual attendance with claimed attendance," the comptroller noted.

“The comptroller office’s continues to find problems with the food programs administered by the Department of Human Services," Wilson said. “Effective monitoring is essential to uncovering fraud within these programs. The monitoring in this situation did not detect obvious irregularities.”

Concerns about a lack of DHS oversight prompted state. Sen. Jim Tracy to propose a measure that would require DHS to conduct background checks on all agencies that receive taxpayer funds to feed children and submit reports every three months to the legislature about fraud, waste and abuse in the program. The measure passed in the Senate unanimously and is making its way through the House.

On Wednesday, Tracy, a Shelbyville Republican, called the comptroller's findings "troubling and unacceptable."

"It's very serious to me," Tracy said. "You’ve got this money designed to go for food for children, and you’ve got people using taxpayer money for their own personal gratification, whether on a house or gazebo. That's awful That is why the public is upset about it. I’m upset about it. It just makes you sick that money for food for children is being used this way."

Tracy's legislation, if it passes, "would put more pressure on DHS to do the monitoring properly."

DHS operates two food programs that are funded through the U.S. Department of Agriculture. The Summer Food Services Program provides meals when school is out to low-income children who qualify. The Child and Adult Food Care Program offers meals in after-school and recreational programs to children, as well as a small number of adults with disabilities.

In February a federal review of DHS food programs found multiple incidents of lax oversight, including a failure to fire contractors who violated program rules, a failure to recover overpayments 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.

The Cherry Tree Food Program and Academy for Kidz have both been referred to local district attorneys. Attempts to reach both agencies were unsuccessful. The former director of Cherry Tree did not answer a knock at her home, and the current offices of the agency were closed. No one answered the phone for a number listed for the Academy for Kidz.

Follow Anita Wadhwani on Twitter: @AnitaWadhwani