(Photo from Shutterstock)
- The letter from HHS sent to Mississippi came in December, prior to the Trump Administration taking the reins. MDHS says information used to determine the $101 million penalty is insufficient.
The Mississippi Department of Human Services (MDHS) is challenging the sufficiency of the information used by the U.S. Department of Health and Human Services (HHS) to arrive at a penalty of $101 million resulting from the state’s misuse of Temporary Assistance for Needy Families, or TANF funds.
HHS issued a penalty notice to Mississippi in December 2024 resulting from misuse of TANF funds in fiscal years 2016, 2017, 2018 and 2019. Director Ann Flagg with the Office of Family Assistance wrote that the federal agency learned of the “apparent multimillion-dollar embezzlement scheme” in Mississippi’s DHS in February 2020. Flagg noted the State Auditor’s announcement of the arrest of at least six individuals involved in fraud and embezzlement.
As previously reported, these arrests included former Executive Director of DHS John Davis, Mississippi Community Education Center founder Nancy New, and her son Zach New. They have since pled guilty to charges in federal and state court.
Flagg wrote that HHS reviewed both the State Auditor’s Single Audit Report for FY 2019 and the forensic audits conducted for MSDHS, adding that HHS was “relying on the expenditure data in [the MDHS audit] reports for determining the amount of TANF funds misused for the purposes of this penalty notice.”
HHS said it arrived at the penalty of nearly $101 million between the 2016 and 2019 fiscal years citing the following misuse of funds by subgrantee disbursement:
- MDHS – $15 million
- 100 Black Men of Jackson – $223,000
- Autism Center of North Mississippi – $75,000
- Family Resource Center of North Mississippi – $16.4 million
- Heart of David Ministries – $558,000
- Jackson Medical Mall Foundation – $21,000
- Mississippi Alliance of Boys and Girls Club – $669,000
- Mississippi Community Education Center – $52.8 million
- Mississippi State University – $1.7 million
- Moore Community House – $145,000
- University of Southern Mississippi – $838,000
In addition, HHS lists misused funds as “fraud, waste, and abuse transactions” of:
- $1.1 million for John Davis conflicts of interest payments
- $7.5 million for John Davis undue influence and favoritism payments
- $3.8 million for other instances of possible fraud, waste, and abuse
MDHS Executive Director Bob Anderson issued a response to the HHS letter on February 18, 2025. He said the state does not believe they nor HHS have all of the information needed to arrive at a final penalty amount quite yet. Anderson noted that MDHS has been involved in civil litigation for over two years aimed at recouping misused TANF funds. He said through their discovery efforts in the lawsuits MDHS they are working to better determine allowability or misuse.
Anderson said MDHS requires additional time to fully respond given the ongoing litigation.
While Anderson addressed his response letter to Flagg, the Biden Administration appointee is no longer listed on the HHS Office of Family Administration’s leadership page on its website. It now only lists La Sherra Ayala as serving as the office’s Deputy Director. Efforts to find out if Flagg was still employed by HHS were unsuccessful.
Magnolia Tribune has sought further clarification on this matter from HHS now that the Trump Administration has assumed the reins at the agency. It is unclear at this point whether HHS, now under the purview of new Secretary Robert F. Kennedy, Jr., is agreeable to working with MDHS or if HHS intends to continue to pursue this matter in the same way as Flagg outlined in her December 20, 2024, letter.
Frank Corder
