THE MISSISSIPPI LEGISLATURE

Introduction

Through a program called JOBS (Job Opportunity and Basic Skills), the federal Family Support Act of 1988 required the states to have in operation by October 1, 1992, a statewide program of education, training, and work experience for certain Aid to Families with Dependent Children (AFDC) recipients. In Mississippi, the Department of Human Services (MDHS) is responsible for identifying the specific services and programs in each of these areas that have the greatest potential for meeting the state's needs. Project Learn, Earn, and Prosper (LEAP) a satellite teaching program developed by the University of Mississippi, has become the primary vehicle MDHS uses to offer literacy and GED training to JOBS participants.

Recently various legislators, state employees, and private citizens have raised questions regarding the efficiency with which the Mississippi Department of Human Services has managed its limited JOBS resources, especially the resources devoted to the education of AFDC recipients who lack a high school diploma or the equivalent. The PEER Committee reviewed the Department of Human Services' administration of Project LEAP, with the review covering the period September 30, 1992, through April 1995, but concentrating on federal fiscal year 1995 operations.

Overview

Late in September 1992, when faced with the federally imposed October 1, 1992, implementation deadline for statewide JOBS services, MDHS contacted the University of Mississippi to develop an operational program by October 1 to avoid loss of over $4 million in federal funds. MDHS subsequently contracted with the university for Project LEAP, literally developed overnight to comply with the deadline and obligate these funds. While the University of Mississippi has fulfilled its contractual responsibilities regarding administration of Project LEAP as a JOBS educational component, MDHS's involvement in LEAP has generated problems in program and financial management.

MDHS failed to comply with federal regulations requiring coordination between LEAP and other adult basic education programs resulting in the location of LEAP sites where other adult education programs have available slots for participants. In the spring of 1995, MDHS granted an additional $20,000 of JOBS funds to renovate a LEAP facility in West, Mississippi, above amounts provided to support other LEAP sites.

For the period February 1995 through April 1995, LEAP participants, on average statewide, attended classes 59% of the time rather than the minimum 75% of the required twenty hours per week.

Regarding financial management, MDHS's noncompliance with federal regulations has resulted in the federal government's disallowance of approximately $2 million in program expenditures. MDHS overcommitted JOBS funds by $3.5 million for fiscal year 1995, 26% of which are LEAP-related expenditures. MDHS's and LEAP's efforts to sell the LEAP program to other public entities, combined with the failure to calculate LEAP costs accurately, have required approximately $144,000 in extra support from JOBS funds.

While reviewing JOBS/LEAP program management, PEER determined that the former MDHS Executive Director, whose decisions during his MDHS tenure had benefited a LEAP contractor, entered into a contractual relationship with that contractor immediately following his resignation as Executive Director. His actions relative to the contractual arrangement create the appearance of impropriety and could constitute a violation of state ethics laws.

Findings

Program Management

MDHS's failure to comply with federal regulations requiring coordination between LEAP and other adult basic education programs results in location of LEAP sites where other adult education programs have available slots for participants. (See page 14.)

Project LEAP is only one of several adult literacy programs in Mississippi providing such services. The state's other primary adult education programs are Adult Basic Education (ABE), under the supervision of the State Board for Community and Junior Colleges, and classes provided by Job Training Partnership Act (JTPA) funds. Federal regulations require certain levels of cooperation between JOBS and these other adult education programs to provide comprehensive, quality services to welfare recipients in the most effective and efficient manner.

Despite federal regulations outlining the minimum requirements for use of established educational services and a statewide JOBS plan stating coordination as an objective, MDHS management has failed to act in accordance with these regulations/objectives. MDHS did not use pre-established programs such as ABE and JTPA to minimize the cost of Project LEAP, and in fact established LEAP sites in counties where participant slots were available in existing educational programs.

In the spring of 1995, MDHS granted an additional $20,000 of JOBS funds to renovate a LEAP facility in West, Mississippi, displacing JOBS funds that could have been used to provide direct services to participants. (See page 17.)

Due to concerted efforts by community leaders of West, MDHS and LEAP staff decided to locate a LEAP "Super Site" adjoining the public library, which was being equipped and renovated with funds provided by the Mississippi Library Commission and other sources. MDHS agreed to contribute an additional $20,000 of JOBS funds to assist in the renovation to accommodate LEAP's needs. While the West site is exceptional and a well-designed facility, the $20,000 supplement represents an investment above and beyond the routine investment for a LEAP site, and displaced JOBS funds which could have been used to provide direct services to other JOBS-related participants.

For the period February 1995 through April 1995, LEAP participants, on average, attended classes 59% of the time rather than the minimum 75% of the required twenty hours per week. (See page 18.)

Federal regulations require participants in JOBS educational programs, such as LEAP, to be in attendance at least fifteen of twenty scheduled classroom hours each week, i.e., 75% of the scheduled class time. For the period February 1995 through April 1995, the most recent period for which data was available, LEAP's average enrollment of 1,160 participants had an average daily attendance of only 59%.

The JOBS program's overall mission as defined by the federal government is to provide AFDC welfare recipients with the skills necessary to obtain welfare independence. If recipients assigned to LEAP do not attend LEAP classes, they receive no benefits from the JOBS program and are less likely to become welfare-independent. It is MDHS's responsibility to follow up on those participants in a timely manner and either verify a plausible reason for non-attendance or sanction that individual.

Financial Management

MDHS has not accurately estimated the costs of LEAP services, has violated federal regulations regarding timing and nature of LEAP/JOBS expenditures, and has over-obligated JOBS funds. (See page 19.)

The University of Mississippi has marketed components of the LEAP program to private organizations and public agencies. However, in at least two instances, LEAP did not calculate costs of services sold and subsequently undercharged for these services by $144,000. Instead of generating revenue to offset expenses of the JOBS program, LEAP has actually undercharged for its services. As a result, JOBS funds have been used to support LEAP services to non-JOBS clients.

Also, LEAP did not bill in a timely manner for some of its services, nor did it handle program income received from one program sale in accordance with federal requirements.

For federal fiscal year 1992, the federal government disallowed $1,991,056 in expenditures because MDHS/LEAP did not spend federal grant money during the proper period and this amount was therefore paid from MDHS's state general funds. If a JOBS program such as Project LEAP fails to follow program guidelines regarding the expenditure of federal grant funds, the program jeopardizes its federal funding. Disallowance of expenditures by the U. S. Department of Health and Human Services could leave a state liable for such expenditures and the program could be forced to reduce or eliminate services or benefits to the program's participants.

MDHS has over-obligated JOBS funds by $3.5 million for fiscal year 1995, 26% of which are LEAP-related expenditures. The impact of this action was the closure of twelve of the sixty-two LEAP sites, displacing twenty-four teachers and aides and eliminating three hundred educational slots for JOBS clients.

Ethics Issue

After terminating his employment as MDHS Executive Director, Gregg Phillips immediately contracted with Synesis, a subcontractor of the LEAP program, which creates the appearance of impropriety and could constitute a violation of state ethics laws. (See page 26.)

Gregg Phillips, former Executive Director for the Department of Human Services, signed a contract modification in 1993 which added two mobile learning labs to the LEAP program. Centec Learning entered into a contract with University of Mississippi to convert two vehicles into these mobile learning labs, while also maintaining and operating them for the term of the contract.

On April 26, 1995, Gregg Phillips resigned his position as Executive Director of MDHS and on the same day entered into a contract with Synesis Corporation, of which Centec is a division. Contract terms called for Mr. Phillips to be paid $84,000 per year to make industry contacts and market Synesis products and services.

Mr. Phillips's actions create the appearance of impropriety, facilitating an erosion of the public trust.

Recommendations

1. MDHS should develop and implement a plan coordinating its JOBS educational needs with existing state/federally funded adult basic educational services. In selecting LEAP sites, MDHS should document any lack of existing services and justify the need for placement of LEAP or any other JOBS-funded educational programs, before JOBS funds are expended in the area.
2. MDHS should perform an internal review of its case management process to determine the reason for low attendance in the JOBS-funded educational program. MDHS should make a written report of this review available to the House and Senate Public Health and Welfare committees prior to the general bill introduction deadline for the 1996 regular legislative session.
3. Prior to selling additional LEAP services, the University of Mississippi should develop a cost allocation process that will reflect the JOBS funds investments made in LEAP. This process should be used to establish LEAP service charges to ensure JOBS funds do not subsidize the sale of LEAP educational services to public entities or private organizations who do not specifically serve JOBS clients. Once income is generated from those sales, the University of Mississippi should apply the income as instructed by federal OMB Circular 110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations."
4. MDHS/JOBS should discontinue using the carryover method, the use of previous year federal grant funds for the current year, or if used, MDHS should ensure expenditures are liquidated and reported to the federal government within the federally allotted period.
5. MDHS should determine the amount of its JOBS funding and obligations prior to the JOBS program year and manage those funds in a manner that will not necessitate funding cuts during the service delivery year.
6. The Executive Director of the PEER Committee shall immediately refer copies of this report to the Executive Director of the Ethics Commission and the Attorney General for an investigation of Mr. Gregg Phillips's contractual relationship with a LEAP subcontractor for determination of violation of state ethics laws. If the Ethics Commission and the Attorney General do not determine this to be a violation based on strict adherence to the law, the Legislature should consider making terms of the ethics law more specific to address contracts executed by an executive officer who does not report to a board or commission.

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