The state agency tasked with administering food programs that were plagued by fraud totaling millions of dollars was the subject of several critical findings released Friday by Arkansas Legislative Audit.
The programs, to feed hungry children, include an at-risk after-school component during the school year and a summer nutrition program to feed children while school is out.
An ongoing fraud investigation pursued by the U.S. Department of Agriculture, the FBI, the Internal Revenue Service and the U.S. Marshals Service has unearthed more than $11 million in fraud in the programs.
The state Department of Human Services failed to develop internal controls, was behind in performing compliance reviews, did not require receipts for reimbursement claims and had an insufficient system for monitoring nonprofit institutions, Arkansas Legislative Audit told legislators.
In response, Keesa Smith, deputy director of the department, told members of the Legislative Joint Auditing Committee that it had entered into contracts with out-of-state firms that specialize in ensuring the federal dollars are spent properly.
"When you look at the finding results, often we were in the process of making the necessary corrections," she said. "We don't take any instance of fraud lightly."
Assistant U.S. Attorneys Jana Harris, Allison Bragg and Cameron McCree have said Human Services Department "insiders" paved the way for the others to sign up as sponsors for food-providing programs operated by the Child and Adult Care Feeding Program. In some cases, no children were served.
Tonique Hatton of North Little Rock and Gladys Elise Waits of England, who both worked for the Human Services Department, have admitted to being the "gatekeepers" who, in return for bribes, made it possible for the others to defraud the program.
Of 14 people charged in nine indictments related to the scheme since December 2014, two were convicted in a jury trial in April and await sentencing; five pleaded guilty and have been sentenced; and seven others who pleaded guilty before trial also await sentencing.
Sen. Terry Rice, R-Waldron, was the only lawmaker to follow up on the audit findings during the meeting.
"We need to do everything we can to at least make people understand somebody's looking at this or we're inviting fraud," he told Human Services Department officials.
The new contracts -- which went into effect in February and March -- are paid by federal funds.
CN Resource LLC of Arizona will be paid a maximum of $51,987 to conduct school-lunch reviews. MH Miles Co. CPA of Georgia will be paid a maximum of $3.14 million to perform reviews and site visits for the Child and Adult Care Food Program and the Summer Food Service Program.
The contracts can be extended until 2023.
In a recent interview, Tonya Williams, who is in charge of the Division of Child Care and Early Childhood Education, said other changes have been made to prevent a recurrence of fraud.
Duties have been altered so that the person who approves an application is not the person who monitors the program. More paperwork also is required by applicants on the front end to prove their financial wherewithal. Monitors are checking third-party data -- such as census records and school-enrollment totals -- to see if food providers are making claims not based in reality.
Of the two former Human Services Department employees who admitted to taking bribes: "They had kind of full range there to be able to do, potentially, the kinds of things that occurred," Williams said. "Now there's a team that handles applications, separate from a team that does monitoring or reviews of programs, separate from a team that handles the correspondence and letters that go out, and then there's a team that handles kind of administrative functions like payments, claims, those type of things."
Metro on 05/13/2017