Child food program failures cost taxpayers millions

Anita Wadhwani | The (Nashville) Tennessean

NASHVILLE -- For five years, Vivian Parker and her two adult daughters raked in nearly half a million dollars in bonuses — taxpayer dollars, rubber-stamped by state officials — to operate a food program in rural west Tennessee intended to feed hungry children.

Parker's nonprofit agency, ABC Nutrition Services, headquartered in the basement of her home, billed the state to pay for salaries that are almost unheard of at small, anti-poverty organizations.

Parker's salary plus bonus topped $100,000 last year. She was also reimbursed for the cost of remodeling her home office in Camden, adding a new deck and widening her driveway. Thousands more were spent on other perks: meals, hotel movies, late credit card fees and cable and internet services.

Year after year, state officials continued to approve payments to the three-person agency, which billed the state to give itself bonuses that, at times, topped $110,000 annually.

Eventually, inspectors with the USDA in 2013 flagged a lack of documentation submitted by ABC Nutrition Services. A year later, auditors with the state Comptroller's office combing through a sample of DHS contractors uncovered other questionable payments.

Administrators with the Department of Human Services, in total, signed off on more than $732,000 in questionable payments to ABC Nutrition Services during a five-year period.

That agency wasn't the only one with questionable billing records discovered in the Department of Human Services-administered food programs responsible for stewarding the expenditures of close to $80 million to feed needy children and some adults.

Auditors with the state Comptroller's office found that some state contractors billed for double the meals they were authorized to provide, failed to file proper paperwork, mysteriously lost paperwork when auditors arrived to inspect them, failed to ensure qualified children received meals and incorrectly calculated administrative expenses owed to them. All of those billing issues added up to $1.8 million in questionable payments last year in just the small sample of agencies auditors reviewed. In 2013, the questioned costs reached $4.3 million.

In some cases, children who were supposed to be fed may not ever have received a meal.

"DHS management had not ensured that critical controls and effective practices were in place and operating as needed," the audit found. A lack of oversight "threatens the integrity of the programs."

"The results of this investigation are extremely troubling," Comptroller Justin Wilson said more pointedly about the failure by DHS to adequately monitor ABC Nutrition Services, which is located 90 miles west of Nashville in Benton County — a region where more than one in four children live in poverty.

"Hundreds of thousands of taxpayer dollars have been misspent by this organization over a five-year period," Wilson said. "This underscores the importance of effective program monitoring and oversight."

'Honor system and good faith'

It is a finding that DHS officials strongly disagree with, even as they acknowledge that fraud and abuse remain a major challenge in the two federal food programs they oversee.

"The program is heavily reliant on the honor system and good faith," DHS' response to the audit stated.

"However it does require a high level of discipline and rigor to effectively administer," DHS spokeswoman Stephanie Jarnagin said in a seven-page written response to The Tennessean's questions. "It presents a challenge even for the well intended. Due to the magnitude of the program, the opportunities for error are high. Unfortunately for the same reasons, the program lends itself to those with ill intentions."

"It only takes a few 'bad actors' to place the program at risk for many. It is disheartening to know there are individuals who are exploiting a program focused on serving vulnerable children."

Jarnagin noted that the questionable payments found by auditors were not in all cases pocketed by unscrupulous providers.

They include tabulating payments to agencies that did not have their paperwork in order, but did provide food to children.

And the questionable payments are not believed to have had a direct impact on children needing food, Jarnagin said. For example, ABC Nutrition Services continued to provide meals and snacks to children at 336 daycare centers it was contracted to work with, she said.

DHS is actively seeking to recoup over-payments, but those efforts have not always been successful.

A DHS review of one Memphis agency paid $280,707 in the 2014 fiscal year found it had not submitted supporting paperwork to document its efforts to feed children. DHS requested the agency return the money. When state auditors sought to contact the agency, DHS could not find its contract with the agency, or locate its director. DHS has not yet gotten the money back.

At another Memphis agency, Kingdom Dominion Worldwide Ministries, auditors scheduled a meeting to examine documentation for meals served. When auditors arrived, the program administrator told them that a busted pipe and roof leak destroyed all her summer food program's supporting documentation the night before.

Auditors found no sign of a leak.

"Based on our inspection of the premises the next day, we did not detect any water damage to the building," the auditors noted. "The Administrator stated that the water damage was cleaned up shortly before our visit and she disposed of the damaged supporting documentation in a trash dumpster. Based on our discussion with the Administrator and inspection of premises, we could not verify whether the sponsor ever had documentation or even served meals to children."

Oversight a problem nationwide

The Department of Human Services is responsible for operating the Child and Adult Care Food Program, as well as a summer food program for children — distributing close to $80 million in federal dollars to middlemen like ABC Nutrition Services.

Those agencies in turn provide snacks and meals to day care centers, mobile lunch buses, emergency shelters and recreational programs, feeding 180,000 Tennessee children during the school year and 42,000 children each day during summer months. About 1,200 adults in adult day care also benefit.

Oversight of the program has been a problem not just in Tennessee, but across the country — stretching back decades. In 1999, the federal General Accounting Office pointed out "material weaknesses" and noted that the opportunities for waste, fraud and abuse were woven into the design of the program.

Efforts at the federal level to root out and prevent fraud have required more state oversight, but states are not able to remove agencies suspected of fraud and abuse from the program without the permission of the Federal Nutrition Program, which often lags behind in those duties.

DHS officials say they have made some strides in addressing the problem. Inspectors are monitoring more food programs, performing site visits earlier in the summer and requiring all contract agencies to undergo online training and optional in-person training. DHS also is transitioning from paper files to electronic files while the department develops a long-term technological solution to monitor the program.

ABC chief, daughters indicted

In the case of ABC Nutrition Services, Jarnagin declined to comment on why state officials did not uncover the over-billings sooner — particularly since they occurred over a five-year period, and DHS is required to inspect facilities at a minimum of every three years.

The bonuses were not pre-approved by DHS, Jarnagin said, noting that the state pays agencies a per-meal rate that nonprofits, in turn, use to cover administrative costs and pay for food. The budgets submitted by ABC Nutrition Services for pre-approval did not note that the bonuses or other questionable payments were included in the per-meal costs submitted for reimbursements, she said.

But even before the Comptroller's 2015 report, inspectors with the USDA in 2013 flagged a lack of documentation from ABC Nutrition Services and other agencies for their expenditures, noting DHS "does not collect adequate information and supporting documents for each budgeted cost to determine if all costs are allowable, reasonable and apply with all applicable laws and regulations."

The federal agency issued a report calling for corrective action by DHS, including collecting required documentation of bonuses and administrative costs.

After the USDA report, DHS began monitoring ABC Nutrition Services, according to Jarnagin.

"Subsequent to USDA, we initiated our normal monitoring process with ABC; however, this process was stopped due to the request from state audit that further communication with this entity should be halted regarding the reviewed time period as noted in the report," Jarnagin said.

The Comptroller's office has since turned over the information about the program to the Benton County District Attorney.

Vivian Parker, CEO of ABC Nutrition Services, along with her daughters Lisa Carter and Tracy Coady, were indicted on theft charges Feb. 19 by a Benton County grand jury. Carter and Coady each posted $50,000 bond. Parker was released on her own recognizance due to health reasons. No trial date has yet been set, according to court records.

"This matter is currently being investigated by the district attorney's office and we are unable to comment pending investigation and legal conclusion," Jarnagin wrote. "The Department takes matters of this nature very seriously and we will continue to cooperate with the district attorney's office and State audit (in the Comptroller's office) during this process."

Efforts to reach Parker and her two daughters were unsuccessful. Benton County District Attorney Matthew Stowe said that he had not yet been notified of an attorney of record for the women.