STATE OF MISSISSIPPI INSTITUTIONS OF HIGHER LEARNING Alfred Rankins, Jr., Ph.D. Commissioner of Higher Education May 6, 2020 The Honorable Shad White, State Auditor Office of the State Auditor P.O. Box 956 Jackson, MS 39205 Dear Mr. White: In reviewing a copy of the attached April 22, 2020 letter from Director Stephanie C. Palmertree, Office of the State Auditor, to Robert Anderson, Executive Director of the Mississippi Department of Human Services, as well as the Single Audit Findings included as an attachment to such letter, I noted important factual inaccuracies. This letter serves as my formal request on behalf of the Mississippi Board of Trustees of State Institutions of Higher Learning to have the inaccuracies corrected. The following statements from the subject State Auditor’s Single Audit Management Report, within page 32 of the Single Audit Findings regarding the lease agreement between the University of Southern Mississippi Athletic Foundation and MCEC, are incorrect: The lease from the Athletic Foundation was then transferred to the University of Southern Mississippi (USM). The transfer of the lease was approved by the Institutes of Higher Learning (IHL) Board in their October 2017 Board Meeting. The subject lease approved by the Mississippi Board of Trustees of State Institutions of Higher Learning was a lease agreement between the University of Southern Mississippi and the University of Southern Mississippi Athletic Foundation (USM Athletic Foundation). This lease agreement allowed the University of Southern Mississippi, at its request, to lease approximately two acres of land to the USM Athletic Foundation. The term of the lease was from the full execution date of the contract until July 31, 2022. There was a separate sub-lease agreement between the USM Athletic Foundation and MCEC. The Board of Trustees does not have the authority to approve, and did not approve, the sub-lease agreement between the USM Athletic Foundation and MCEC. The sub-lease agreement between the USM Athletic Foundation and MCEC was not transferred to the University of Southern Mississippi. 3825 RIDGEWOOD ROAD • JACKSON, MISSISSIPPI 39211 • TEL: (601) 432-6623 • FAX: (601) 432-6972 Mr. White May 6, 2020 Page 2 of 2 The only agreement related to these matters which was approved by the Board of Trustees in October 2017 was the lease agreement between the University of Southern Mississippi and the USM Athletic Foundation (see attached excerpt from the minutes of the October 2017 meeting of the Board of Trustees). This lease agreement was reviewed by a Special Assistant to the Attorney General and recommended by the Attorney General’s Office for approval by the Board of Trustees. I respectfully request that you have the inaccuracies within the attached document corrected. Thank you in advance for your consideration of this important matter. Respectfully, Alfred Rankins Jr., Ph.D. Commissioner of Higher Education Attachments STATE OF MISSISSIPPI OFFICE OF THE STATE AUDITOR SHAD WHITE April 22, 2020 Single Audit Management Report Robert Anderson, Executive Director Mississippi Department of Human Services 200 South Lamar St. Jackson, MS 39201 Dear Mr. Anderson: Enclosed for your review are the single audit findings and other audit findings for the Mississippi Department of Human Services for Fiscal Year 2019. In these findings, the Auditor’s Office recommends the Mississippi Department of Human Services: Single Audit Findings: 1. Strengthen controls to ensure compliance with subrecipient allowable cost activities of the SNAP, CCDF, TANF and SSBG programs; 2. Strengthen controls in order to verify expenditures are allowable and appropriate for Supplemental Nutrition Assistance Program (SNAP); 3. Strengthen controls over compliance with allowable cost requirements of the TANF program; 4. Strengthen controls over compliance with allowable cost requirements of the CCDF Cluster; 5. Strengthen controls over review of computations and data for Allowable Cost activity used in the manual cost allocation process and review of indirect costs allocated to federal programs; 6. Strengthen controls over compliance with cash management requirements of the Temporary Assistance for Needy Families (TANF) program; 7. Strengthen controls over compliance with eligibility and benefit payment requirements of the CCDF Cluster; 8. Strengthen controls to ensure compliance with the matching requirements of the CCDF Cluster; 9. Strengthen controls to ensure compliance with the award’s Period of Availability/Period of Performance for the CCDF program; 10. Strengthen controls over procurement policies and awarding subgrants for the TANF program; 11. Strengthen controls over procurement policies relating to subrecipients for Supplemental Nutrition Assistance Program (SNAP); 12. Strengthen controls over submission of required federal reports of the TANF program; 13. Strengthen controls over on-site monitoring for the Supplemental Nutrition Assistance Program (SNAP), Child Care and Development Block Grant (CCDF), Temporary Assistance for Needy Families (TANF), Social Services Block Grant (SSBG) and Low Income Home Energy Assistance (LIHEAP) Programs; 14. Strengthen controls over subrecipient monitoring of OMB Uniform Guidance Audits for the Temporary Assistance for Needy Families (TANF), Child Care and Development Block Grant (CCDF), Low Income Home Energy Assistance Program (LIHEAP), and Social Services Block Grant (SSBG) Programs; and POST OFFICE BOX 956 • JACKSON, MISSISSIPPI 39205 • (601) 576-2800 • FAX (601) 576-2650 Mississippi Department of Human Services April 22, 2020 2 Page 15. Strengthen controls over the review of Foster Care maintenance payment rates and the calculation of Foster Care maintenance payments for the Title IV-E Foster Care program. Other Audit Finding: 16. Strengthen controls over the removal of MAVERICS User Login Profiles for the TANF Program. Please review the recommendations and submit a plan to implement them by April 29, 2020. The enclosed findings contain more information about our recommendations. During future engagements, we may review the findings in this management report to ensure procedures have been initiated to address these findings. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Uniform Guidance. Accordingly, this report is not suitable for any other purpose. However, this report is a matter of public record and its distribution is not limited. I hope you find our recommendations enable the Mississippi Department of Human Services to carry out its mission more efficiently. I appreciate the cooperation and courtesy extended by the officials and employees of the Mississippi Department of Human Services throughout the audit. If you have any questions or need more information, please contact me. Sincerely, Stephanie C. Palmertree, CPA, CGMA Director, Financial and Compliance Audit Division Enclosures Mississippi Department of Human Services April 22, 2020 3 Page SINGLE AUDIT FINDINGS In conjunction with our audit of federal assistance received by the State of Mississippi, the Office of the State Auditor has completed its audit of the State’s major federal programs administered by the Mississippi Department of Human Services for the year ended June 30, 2019. Our procedures and tests cannot and do not provide absolute assurance that all federal legal requirements have been met. In accordance with Section 7-7-211, Mississippi Code Annotated (1972), the Office of the State Auditor, when deemed necessary, may conduct additional procedures and tests of transactions for this or other fiscal years to ensure compliance with legal requirements. Report on Compliance for Each Major Federal Program We have audited the Mississippi Department of Human Services’ compliance with the types of compliance requirements described in the OMB Uniform Guidance Compliance Supplement that could have a direct and material effect on the federal programs selected for audit that are administered by the Mississippi Department of Human Services for the year ended June 30, 2019. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the State of Mississippi’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles and Audit Requirements (Uniform Guidance). Those standards and Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Mississippi Department of Human Services’ compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. However, our audit does not provide a legal determination of the Mississippi Department of Human Services’ compliance. Results of Compliance Audit Procedures The results of our auditing procedures disclosed instances of noncompliance with those requirements, which are required to be reported in accordance with OMB Uniform Guidance and which are identified in this letter as items 2019-030, 2019-031, 2019-032, 2019-033, 2019-034, 2019-035, 2019-036, 2019-037, 2019-038, 2019-039, 2019-042, and 2019-043. Internal Control over Compliance Management of the Mississippi Department of Human Services is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Mississippi Department of Human Services’ internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal controls over compliance in accordance with OMB Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Mississippi Department of Human Services April 22, 2020 4 Page Accordingly, we do not express an opinion on the effectiveness of Mississippi Department of Human Services’ internal control over compliance. Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses and significant deficiencies. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiencies in internal control over compliance identified in this letter as items 2019-030, 2019-031, 2019-032, 2019-033, 2019035, 2019-039, 2019-042, and 2019-043 to be material weaknesses. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiencies in internal control over compliance identified in this letter as items 2019-034, 2019-036, 2019-037, 2019-038, 2019-040, 2019041, and 2019-044 to be significant deficiencies. In addition, we noted another other deficiency in internal control over compliance that require the attention of management that we have reported on the attached document, “Other Audit Findings,” as items OTH19-01. Findings and Recommendations ACTIVITIES ALLOWED/ALLOWABLE COSTS Material Weakness Material Noncompliance 2019-030 The Mississippi Department of Human Services Should Strengthen Controls to Ensure Compliance with Subrecipient Allowable Cost Activities. CFDA Number(s) 10.551 Supplemental Nutrition Assistance Program (SNAP) 10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (SNAP) 93.558 Temporary Assistance for Needy Families (TANF) 93.575 Child Care and Development Block Grant (CCDF) 93.596 Child Care Mandatory and Matching Funds of the Child Care and Development Fund (CCDF) 93.667 Social Services Block Grant (SSBG) Mississippi Department of Human Services April 22, 2020 5 Page Federal Award 12-35-2841 (SNAP) 2017IQ390345 2018IQ390345 G1701MSTANF G1801MSTANF G1901MSTANF G1702MSTANF G1701MSCCDF G1801MSCCDF G1901MSCCDF Pass-Through U.S. Department of Agriculture, U.S. Department of Health and Human Services Questioned Costs $94,164,608. See chart at the end of finding for detailed information. Repeat Finding No. Statistically Valid Varying types of sampling and testing techniques were used; some are considered statistically valid and some are not. During the initial planning phase of the audit, auditor identified population as two separate and distinct groups – 1) Payments made by MDHS for services other than direct assistance to recipients 2) Payments made to first tier subgrantees. However, due to increased fraud risk during the audit, transactions were subdivided into many different populations so that statistical projection of error rates could be utilized. High risk populations were examined at 100 percent, moderate risk populations were sampled individually, and low risk items were grouped in one population to sample. Additionally, after initial testing, it was determined that fraud risk was still at a high level and a nomenclature review over the populations was performed to pull out specific transactions as individually significant. Background Auditors were alerted to significant areas of fraud risk by the Governor of Mississippi on June 21, 2019. An internal audit performed by staff of MDHS uncovered a possible fraudulent scheme involving a third party contractor in the TANF program and the Executive Director of MDHS at that time (JD). Investigators from the OSA Investigative Division and financial auditors worked to piece together information about this scheme and subsequently indicted six individuals involved in a conspiracy to steal (by a variety of means) approximately $4 million in TANF funds. The initial investigation into the theft coincided with the fiscal year 2019 Single Audit. Due to this known fraud, auditors considered many areas of grant expenditures to be high risk. In order to properly account for and describe the significant areas of waste, fraud, and abuse that were uncovered during the subsequent investigation and audit, the finding format of this particular finding will vary. Criteria Applicable Internal Controls: The Committee of Sponsoring Organizations of the Treadway Commission (COSO) and the United States Government Accountability Office (GAO) Green Book dictates that in order for organizations to have effective internal control, the organization should have an effective control environment. A component of an effective control environment is proper oversight ability, accountability and commitment to ethical values. Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.404) states “A cost is reasonable - if in its nature and amount, it does not exceed that which would be incurred by a prudent Mississippi Department of Human Services April 22, 2020 6 Page person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the entity is predominately federally funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. (c) Market prices for comparable goods or services for the geographic area. (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost.” The Code of Federal Regulations (2 cfr 200.405 (a)) states “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.” MDHS requires each subgrantee to attest by signature that they have read and understood the Subgrantee Manual issued by MDHS before payments on awards can be made. Additionally, each subgrant administered by MDHS is governed by the standard Subgrantee Agreement which sets out specific regulations that govern the subgrant. The Office of Family Assistance, a Division of the Office of Administration for Children and Families and the grantor of TANF funds, states there are four tenets of the TANF program – 1) To provide assistance to needy families so that children can be cared for in their own homes or in the homes of relatives; 2) End the dependence of needy parents by promoting job preparation, work, and marriage; 3) Prevent and reduce the incidence of out-of-wedlock pregnancies; and 4) Encourage the formation and maintenance of two-parent families. The Office of Family Assistance produced Q&A: Use of Funds, published on May 2, 2013, which clarifies the use of funds for “needy” families and is copied, verbatim, below: “Q1: May States help the non-needy with services that are consistent with TANF purpose one or two as long as those services fall outside the definition of assistance?” “A1: No. The first two statutory purposes (related to caring for children in their own homes and ending dependence) are expressly for the needy. Therefore, the statute envisions that States would serve only the needy when they are conducting activities or providing benefits that are reasonably calculated to accomplish TANF purpose one or two. This means that States would have to develop and apply criteria Mississippi Department of Human Services April 22, 2020 7 Page of financial need in these cases. However, States may use Federal TANF funds to help both the needy and the non-needy with benefits or services that are reasonably calculated to accomplish TANF purpose three or four (which relate to reducing outof-wedlock pregnancies and the formation and maintenance of two-parent families). In serving the non-needy, States may use only segregated Federal TANF funds.” While states are allowed and encouraged to use creative mechanisms to accomplish the four main goals of TANF, the core purpose of the grant is to assist the needy. States are allowed, in their State Plan, to define the eligibility of needy per tenet and/or initiative. The TANF State Plan, as prepared by MDHS, states the following income limits/thresholds for determining the eligibility of individuals for each initiative:       Intensive Youth Supervision Programs – To provide a diversionary, community based intensive supervision program for youth offenders. Individuals must be at or below 300 percent of the Federal Poverty Level. Child Care Enhancements – To end the dependence of needy parents on government benefits by promoting job preparation, work and marriage. Must be TANF participants, or low income families at risk of going onto TANF that are eligible for CCDF. Responsible Fatherhood Initiative – To encourage the formation and maintenance of two-parent families and prevent and reduce out-ofwedlock pregnancies. Financial eligibility determination is not required for this program. Post-Employment Assistance Programs – To end the dependence of needy parents on government benefits by promoting job preparation and work. Families eligible for this program are not required to be TANF eligible, but must be at or below 200 percent of the Federal Poverty Level. TANF Prevention/Intervention – To develop projects in communitybased settings to prevent and reduce at-risk behaviors among youth and their families to prevent or break the cycle of welfare dependence. Financial eligibility determination is not required for this program. Healthy Choices, Brighter Future Initiative – To involve community, faith-based organizations, schools and families in the establishment of educational and training programs on youth leadership development and teen pregnancy prevention promoting abstinence. Financial eligibility determination is not required for this program. Additionally, based on the availability of funds, the following initiatives are outlined in the TANF State Plan:  TANF Summer Enrichment Program – no eligibility criteria are defined.  TANF Work Program - no eligibility criteria are defined.  Crisis Intervention Program – Families are not required to be TANF eligible but must be below 150 percent of the Federal Poverty Level.  Funds may be made available to Attorney General to implement programs that serve at risk youth. No eligibility criteria are defined. Mississippi Department of Human Services April 22, 2020 8 Page     TANF Funds may be used for temporary care of children in foster care. Families eligible for this program are not required to be TANF eligible but must be below 300 percent of the Federal Poverty Level. Families First Resource Centers – Individuals must be at or below 300 percent of the Federal Poverty Level. TANF funds may be used to provide family preservation services to families with dependent children. Families must be at or below 300 percent of the Federal Poverty Level. State Coalition of the Young Men’s Christian Association (YMCA) for the purpose of developing and implementing statewide programs that serve the unmet needs of youth by way of Adolescent Offenders and Teen Leadership Programs. Individuals eligible for this program are not required to be TANF eligible, but must be at or below 300 percent of the Federal Poverty Level. The MDHS Subgrant/Contract Manual states in Section 5, under the heading “Financial Management – Accounting Procedures” that “Separate financial records shall be maintained for each subgrant. Separation serves record keeping requirements and also eliminates potential conflicts with the subgrantees’ usual record keeping systems which may reflect a different fiscal year, or accounting by function or department rather than by subgrant or work activity. Each subgrantee shall maintain one set of accounting records for the entire subgrantee entity which shall separately identify the receipts and disbursements for each subgrant or other source of funds. The subgrantee shall be able to isolate and trace every subgrant dollar from receipt to expenditure and have on file appropriate supporting documentation for each transaction. Examples of documentation are vendor invoices, bills of lading, purchase orders, payment vouchers, payrolls, bank statements and reconciliations, documentation to verify that only eligible clients were served; employee activity sheets to verify activities performed and the actual hours worked for each activity/subgrant; and, cash receipt logs to verify all funds received and the actual date of receipt.” Due to the substantial amount of questioned costs found during the fiscal year 2019 audit, questioned costs are grouped by category/type of expenditure below. Each bulleted item below will also state the specific law, regulation or control that was violated. Condition During the audit of fiscal year 2019, auditors noted that MDHS Executive Leadership (specifically the former Executive Director, JD) participated in a widespread and pervasive conspiracy to circumvent internal controls, state law, and federal regulations in order to direct MDHS grant funds to certain individuals and groups. Executive Director JD purposefully and willfully disregarded federal and state procurement regulations in order to award a substantial portion of grant funds from the TANF program to two specific subgrantees. These two subgrantees were granted monies under the Families First Resource Center portion of the TANF State Plan, which requires verification of eligibility criteria, defined as income at or below 300 percent of the Federal Poverty Level. Executive Director JD then instructed these two subgrantees - Mississippi Community Education Center (MCEC) and Family Resource Center of North Mississippi Department of Human Services April 22, 2020 9 Page Mississippi (FRC) - on which organizations and individuals to fund with third tier grants. During the audit, auditors asked both of the two subgrantees to provide any evidence or verification to support claims that MDHS approved transactions or instructed the subgrantees to fund certain projects. Both claimed that instructions were verbal and could not provide proof. Auditors were able to verify some transactions were approved by Executive Director JD and MDHS executive staff (both current and former) by performing a review of MDHS internal documents. It is important to note that the subgrantees signed and attested to the subgrantees’ responsibility to ensure compliance with the regulations, policies, guidelines, and requirements imposed by the Federal grantor agency and MDHS. The subgrantees also signed and attested that the relationship between MDHS and the subgrantee is not one of an employer-employee relationship, and that there should not be relationship such as principal and agent; partners; joint ventures; or any other similar relationship between MDHS and the Subgrantee. Additionally, Executive Director JD instructed MDHS staff to disregard federal regulations concerning monitoring and allowable costs to ensure that grant funds continued to flow to these subgrantees. Executive Director JD, upon accepting the position of Executive Director in January 2016, continued to fund these two subgrantees with large grants in fiscal years 2017, 2018 and 2019. JD expanded on the existing grants with TANF and also began funding MCEC and FRC with additional awards generated from the CCDF, SNAP, MVAP, and TFAP federal programs. Total amount funded to each of these two subgrantees referenced above is noted below: Initial Awards plus/less any Modifications MCEC FRC TANF 2019 $19,422,992 $7,500,000 TANF 2018 $18,843,072 $17,620,170 TANF 2017 $1,000,000 $12,971,208 SNAP 2019 $1,034,685 N/A SNAP 2018 $2,615,774 N/A CCDF 2019 (From MS Community College $2,268,381 $2,177,483 Board by grant from MDHS)* CCDF 2018 (From MDHS directly) $3,484,592 $500,000 SSBG 2018 $3,000,000 $3,000,000 SSBG 2017 N/A $900,000 Other unaudited federal grants**2019 N/A $497,987 Other unaudited federal grants**2018 $30,000 $527,987 Other unaudited federal grants** 2017 $30,000 N/A *MCEC and FRC are second tier subgrants from MS Community College Board **MAVP and TFAP, included for informational purposes only. Both MCEC and FRC also awarded subgrants of federal monies to different programmatic groups (hereafter “second tier subgrants”). Additionally, MCEC and FRC expended federal grant funds on administrative expenses and contracts. In order to opine on the allowable costs compliance requirement, and, due to MDHS’ repeated material weakness and material noncompliance findings for Subrecipient Monitoring in prior years Single Audit Reports, auditors felt obligated to review programmatic and administrative expenditures at the first tier subgrantee level due to the materiality of the grant awards. Mississippi Department of Human Services April 22, 2020 10 P a g e Audit work performed at MCEC and FRC determined that federal monies had been comingled with other sources of revenue – namely fundraising revenue. Both entities utilized classification codes to identify the source of the income when paying vendors or coding expenses. However, through inquiry and analysis, auditors were able to determine that MCEC used their “MDHS Grant Fund” bank account to pay all expenses of the nonprofit – whether the expenses were federal, state or private. Additionally, when audit personnel asked for details about their record keeping, auditors were told that even though fundraising monies were deposited into the “MDHS Grant Fund” bank account, they were then transferred to their own bank accounts for proper record keeping, but all expenses were still made from the MDHS Grant Account; thereby using grant funds for all expenses whether federal, state or private. Based on financial records of MCEC, MCEC did not maintain enough private, nongovernmental grant revenue to pay for the private expenditures made by the nonprofit (fundraising expenses, investments, profit sharing contributions, etc). Moreover, auditors were able to determine that MCEC falsified requested documents and general ledgers that were provided to the auditor. These falsified documents included contracts with artificial scopes to indicate possible adherence with TANF guidelines, forged signatures on contracts, general ledgers and expense reports with transactions removed, etc. Additionally, information provided to auditors often contradicted information that had been provided to MDHS. Finally, auditors noted that some transactions that were originally coded in the accounting software as “TANF expenditures” were changed to “Administrative expenditures” after staff from the Office of the State Auditor (OSA) inquired about TANF expenditures. Therefore, unless auditors could determine that private expenditures were paid for with 100 percent private funds, the expenditures were included in the nomenclature review of transactions. FRC’s financial records were found to be inconsistent in their treatment of different expenditures and the classification of those expenditures. Subgrant payments were coded to a variety of expense codes, and payees were coded as both vendors and “other names” in the financial records. In one instance, similar payments for a transaction were coded as “Consulting”, “Contractual” and “Subsidies, Loans, and Grants”. Based on information in the accounting records, FRC coded expenses based on preliminary budgetary figures and not based on actual cost categories. The following exceptions were noted during the testwork of expenditures at the MDHS level and first tier subgrantee level. It should be noted that some recipients of funds from both MCEC and FRC were not aware that they were being awarded federal monies when granted contracts, grants, or awards. Neither MCEC or FRC provided the required federal information on any contract, grant, or award that stated the source of the funds, including the name of the Federal Program or the CFDA number. Without these required disclosures, auditors are unable to determine if contractors or second tier subgrantees of MCEC and FRC were aware of allowable cost criteria or restrictions. All amounts questioned below are TANF funds unless otherwise noted. While this report is for fiscal year ended June 30, 2019, auditor determined that there were substantial questioned costs in prior fiscal years. When questioned costs were Mississippi Department of Human Services April 22, 2020 11 P a g e discovered in prior fiscal years, that information has also been included in this report for informational reasons. Personal Benefit Contracts/Related Party Contracts Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.318(c)) states no employee, officer, or agent of a grantee may participate in the selection, award or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest. Conflicts of interest are defined as any instance when the officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated, has a financial or other interest in or a tangible personal benefit from a firm is considered for a contract supported by federal awards. The Code of Federal Regulations (2 cfr 200.459(a)) states that, in order to be paid as a consultant, a person must possess a special skill, and not be considered an officer or employee of the entity. Signed subgrant agreements between MDHS and the subgrantees state in Section XXIX – Conflict of Interest - “Subgrantee must ensure that there exists no direct or indirect conflict of interest in the performance of the Subgrant. Subgrantee must warrant that no part of federal or state money shall be paid directly or indirectly to an employee or official of MDHS as wages, compensation or gifts in exchange for acting as an officer, agent, employee, subcontractor or consultant to the Subgrantee in connection with any work contemplated or pertaining to the Subgrant.” In Section VI – Relationship of the Parties, it states, “It is expressly understood and agreed that MDHS enters into this Subgrant with Subgrantee on a purchase of service basis and not on an employer-employee relationship basis. Nothing contained herein shall be deemed or construed by MDHS, the Subgrantee, or any third party as creating the relationship of principal and agent, partners, joint venturers, or any similar such relationship between MDHS and the Subgrantee. Neither the method of computation of fees or other charges, nor any other provision contained herein, nor any acts of MDHS or the Subgrantee hereunder, creates or shall be deemed to create a relationship other than the independent relationship of MDHS and the Subgrantee.” The MDHS Subgrant/Contract Manual, which subgrants must attest to have read and understood prior to receiving grant awards, states in Section 6, under the heading “Open and Free Competition” that “all procurement transactions shall be conducted in a manner that provides maximum open and free competition consistent with…applicable federal law. Procurement procedures shall not restrict or eliminate competition…Examples of what is considered to be restrictive of competition include, but are not limited to…noncompetitive contracts to consultants that are on retainer contracts…organizational conflicts of interest.” Mississippi Department of Human Services April 22, 2020 12 P a g e Exceptions/Questioned Costs: During testwork for activities allowed and allowable costs, the auditor noted the following violations regarding conflicts of interest:  MCEC awarded contracts for services to members of Executive Director JD’s immediate family, including a company owned by his brother-in-law and his nephew. o JD’s brother-in-law was initially contracted for a business lease of property in the amount of $365,000. The property was located in Brookhaven, MS and was leased for a three-year period for a sum of $88,333 annually, with a $100,000 non-refundable security deposit. The effective date of the lease was upon “completion of the building” indicating that the property was not available for use when the lease was signed (February 2, 2019). However, the lessor was paid three payments totaling $365,050 between February 5, 2019 and February 7, 2019. On May 2, 2019, MCEC notified the lessor that they would be terminating the lease in 60 days from the date of the letter, and would request reimbursement of any unused rental payments and that those payments should be reimbursed on August 15 and September 15, 2019. Based on inquiry with MCEC personnel and a review of MCEC financial records, no repayment of any funds was ever made. Questioned costs in fiscal year 2019- $365,050 o JD’s brother-in-law was contracted as the “Leadership Outreach Coordinator” for a sum of $150,000. The contract term was from June 1, 2018 to September 30, 2019. However, the total fee of the contract was paid in a lump sum on June 1, 2018. Questioned costs in fiscal year 2018 - $150,000 o JD’s nephew was contracted to coordinate and create a Coding Academy and Website Design program in the amount of $139,500 for the period of February 1, 2019 to January 31, 2020. A lump sum payment in the amount of $139,500 was made on February 2, 2019. Additionally, travel in conjunction with the contract in the amount of $1,309 was reimbursed. Questioned costs in fiscal year 2019- $140,809 o JD’s nephew was also employed by MCEC from July 16, 2018 through February 15, 2019 at a semimonthly salary of $5,000 (annualized to $120,000 annually). For the period of February 1st through 15th in 2019, he was both contracted and employed by Mississippi Department of Human Services April 22, 2020 13 P a g e MCEC for an overlapping period. Gross pay for the period totaled $67,769.23. Questioned costs in fiscal year 2019- $67,769  FRC awarded contracts and employed the same individuals as MCEC above. o JD’s brother-in-law was employed by FRC from July 1, 2018 to July 15, 2019. Gross pay for the period totaled $93,600. These funds were paid via the Early Childhood Academy grant funded by MDHS through the CCDF grant. Questioned costs for fiscal year 2019 - $93,600 (CCDF) o JD’s nephew was also employed by FRC from October 17, 2017 through July 12, 2018. Gross pay for the period totaled $55,625. For the period of June 15th through July 12, 2018, he was both contracted and employed by FRC for an overlapping period. Additionally, travel in conjunction with the contract in the amount of $14,368 was reimbursed. While the amount of the contract was paid prior to fiscal year 2019, it is included in this report because it was discovered by auditors during the 2019 audit. Questioned costs in fiscal year 2018 - $63,975 Questioned costs in fiscal year 2019 - $6,018 o JD’s nephew was contracted to coordinate and create a Coding Academy and Website Design program in the amount of $130,000 for the period of June 15, 2018 to June 14, 2019. A lump sum payment in the amount of $130,000 was made on July 16, 2018. Additionally, travel in conjunction with the contract in the amount of $14,278 was reimbursed. The travel reimbursements are often from Mississippi to New Orleans and include mileage reimbursements, hotel stays, per diem reimbursement, in room dining in addition to per diem, etc. The contract states that the contract amount should be inclusive of all fees necessary to complete the program; therefore, even if the initial contract was made at an arm’s length bargaining arrangement, the travel would be questioned. Based on inquiry with personnel at FRC, the travel was needed so that JD’s nephew could obtain the necessary skills to teach the coding academy. Questioned costs in fiscal year 2019- $144,278  MDHS also employed JD’s nephew from September 16, 2016 to October 15, 2017 at varying salaries ranging from $36,177 to $45,000. His ending salary, $45,000, was paid from TANF funds in fiscal year 2018. Due to the intertwined and familial relationship, it is necessary Mississippi Department of Human Services April 22, 2020 14 P a g e to question the salary payments plus fringe. Actual salary payments plus fringe included $50,173 in FY 2017 and $19,477 in FY 2018. Questioned costs in fiscal year 2017 - $50,173 Questioned costs in fiscal year 2018 - $19,477 Total amount paid to JD’s brother-in-law – $608,650 Total amount paid to JD’s nephew – $492,499 Total amount questioned in 2017 – $50,173 Total amount questioned in 2018 – $233,452 Total amount questioned in 2019 – $723,924 Total amount questioned in 2019 – $93,600 (CCDF) Governmental Relations/Lobbyists Laws and Regulations: The Code of Federal Regulations (2 cfr 200.450) states that the cost of certain influencing activities associated with obtaining grants, contracts, cooperative agreements, or loans is an unallowable cost. Additionally, paragraph (c) puts additional restrictions on nonprofit organizations, such as MCEC and FRC. Those restrictions include any costs to influence the outcome of any federal, state, or local election, referendum, initiative, or similar procedure through in-kind or cash contributions, endorsements, publicity, or similar activity is unallowable. Any legislative liaison activity, including attendance at legislative sessions or committee hearings, gathering information regarding legislation, and analyzing the effects of legislation is also unallowable. The Code of Federal Regulations Title 45. Public Welfare (45 cfr 93.100(a)) states that no appropriated funds may be expended by the recipient of a Federal contract, grant, loan, or cooperative agreement to pay any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with any of the following covered Federal actions: the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement. The MDHS Subgrant/Contract Manual, which subgrantees must attest to have read and understood prior to receiving grant awards, sets out and defines the regulations that subgrantrees and lower-tier subrecipients must follow, including the “Restrictions on Lobbying – Common Rule (P.L 101-121, Section 319).” Internal Revenue Service Publication 4221-PC (Revised 3-2018) states “A public charity is not permitted to engage in substantial legislative activities (commonly known as lobbying). An organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for purposes of proposing, supporting or opposing legislation, or Mississippi Department of Human Services April 22, 2020 15 P a g e advocates the adoption or rejection of legislation…. a 501(c)(3) organization may…risk losing its tax-exempt status and/or be liable for excise taxes.” Exceptions/Questioned Costs: During testwork for activities allowed and allowable costs, the auditor noted the following violations regarding Governmental Relations/Lobbying:  MCEC entered into multiple contractual agreements with consulting firms in order to maintain governmental revenue streams or to lobby on behalf of their organization, the Families First Initiative, or MDHS. Based on a nomenclature review of the financial records, auditors were able to determine the following unallowable lobbying contracts: o o o AvantGarde Strategies was paid $21,000 in FY 2019, but no contract was provided to the auditor. Inside Capital was paid $14,000 in FY 2017; $150,325 in FY 2018; and $154,000 in FY 2019 for a total of $318,325. No contract was provided to the auditor. Lucas Compton was contracted by MCEC for services including sustaining federal revenue streams and bipartisan advocacy. The contract was for the period of October 1, 2017 through October 1, 2018. Actual payments included $36,000 in FY 2018 and $36,000 in FY 2019 for a total of $72,000. Questioned costs for fiscal year 2017 – $14,000 Questioned costs for fiscal year 2018 – $186,325 Questioned costs for fiscal year 2019 – $211,000  FRC entered into a contractual agreement with Lucas Compton for $84,000 in fiscal year 2018. Auditor did not have a copy of the contract to determine the performance period of the contract. Questioned costs for fiscal year 2018 – $84,000 Total amount questioned in 2017 – $14,000 Total amount questioned in 2018 – $270,325 Total amount questioned in 2019 – $211,000 Consulting Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.459(a)) states that costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non- Federal entity, are allowable, subject to paragraphs (b) and (c) when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal government. Mississippi Department of Human Services April 22, 2020 16 P a g e The Code of Federal Regulations (2 cfr 200.318(d)) states that the subgrantee must avoid acquisition of unnecessary or duplicative items. Signed subgrant agreements between MDHS and the subgrantees state, in Section XI “Agreements by Subgrantee” – A. General Responsibility, that entities currently in a contractual relationship with MDHS to provide the same or similar services are not eligible to enter into a Contract/Subcontract with the Subgrantee. Exceptions/Questioned Costs: During testwork for activities allowed and allowable costs, the auditor noted the following violations regarding consultants:  MCEC entered into multiple contractual agreements with consulting firms on behalf of their organization, the Families First Initiative, or MDHS. These consulting contracts were often for duplicative services for overlapping time periods and were for large sums of money. Additionally, auditors could find no evidence that any type of procurement regulations were followed in securing these contracts. Both MCEC and FRC indicated to auditors that former Executive Director JD instructed both subgrantees to enter into contracts with some of these individuals. Due to the excessive fees paid for these contracts and the duplicative services, auditor considers these costs to be unreasonable, and therefore questioned. Additionally, many of the expenses coded to “Consulting” in MCEC’s general ledger do not appear to be for legitimate consulting services. Those expenditures will be detailed in additional sections based on the actual purpose of the purchases. Based on a nomenclature review of the financial records and a detailed review of contracts, auditors were able to determine the following questioned costs (names of private individuals will not be used due to restrictions on personally identifiable information (PII)): o o o o The Stephen Group was contracted to provide strategic organizational, process and management consulting services and provide Families First with project management support surrounding the concept of generational poverty. The term of the contract was for the period of November 28, 2017 through November 27, 2018 with a renewal option for December 1, 2018 through December 1, 2019. The initial contract was not to exceed $500,000 and was to be split between MCEC and FRC. Actual payments on the contract included $74,157 in FY 2018 and $139,256 in FY 2019 for a total of $213,413. Consultant 1 was contracted to perform services but no copy of the contract was made available to auditors. Payments included $34,000 in FY 2018 and $6,000 in FY 2019 for a total of $40,000. Consultant 2 was paid for consulting services regarding curriculum. Payments included $97,500 in FY 2018. NCC Ventures was contracted to plan and coordinate industry sector initiatives with small businesses, and to provide training regarding workforce development. Contracted amount was Mississippi Department of Human Services April 22, 2020 17 P a g e o $50,000. Actual payments totaled $41,667 in FY 2018; $4,167 in FY 2019 for a total of $45,834 Institute of Project Management was contracted for services coded as consulting in the general ledger; however, no contract was provided to auditors. Payments included $45,000 in FY 2018. Questioned costs for fiscal year 2018 – $292,324 Questioned costs for fiscal year 2019 – $149,423  FRC entered into contractual agreements with the same consulting organizations as MCEC, as follows: o o o The Stephen Group was contracted to provide strategic organizational, process and management consulting services and provide Families First with project management support surrounding the concept of generational poverty. The term of the contract was for the period of November 28, 2017 through November 27, 2018 with a renewal option for December 1, 2018 through December 1, 2019. The initial contract was not to exceed $500,000 and was to be split between MCEC and FRC. Actual payments on the contract included $65,394 in FY 2018 and $142,053 in FY 2019 for a total of $207,447. CG Consulting was contracted for $16,000 from August 2, 2018 to July 31, 2019. The scope of the project was for professional development plans, training, and evaluation plans. Actual payments of $8,000 were made in fiscal year 2019. NCC Ventures was also contracted by FRC for workforce development training, but no contract was provided to auditors. Actual payments included $50,000 in FY 2018. Questioned costs for fiscal year 2018 – $115,394 Questioned costs for fiscal year 2019 – $150,053  MDHS also entered into a consulting contract with NCC Ventures during FY 2018 for a total of $72,900 from December 1, 2017 to May 31, 2018. The contract was paid out in equal installments of $12,150 from March 2018 to September 2018, which is four months after the contract end date. The entire contract amount of $72,900 was paid. This amount is questioned in Finding #2019-039. Total amount questioned in 2018 – $407,718 Total amount questioned in 2019 – $299,476 Payments for Sports/Coaches/Sporting Celebrities Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. Mississippi Department of Human Services April 22, 2020 18 P a g e The Code of Federal Regulations (2 cfr 200.459(a)) states that costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non- Federal entity, are allowable, subject to paragraphs (b) and (c) when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal government. The Code of Federal Regulations (2 cfr 200.434(a)) states the costs of contributions and donations, including cash, property, and services from the grantee to other entities are unallowable. The Code of Federal Regulations (2 cfr 200.469) states the costs incurred for intramural activities, student publications, student clubs, and other student activities, are unallowable, unless specifically provided for in the Federal award. The TANF State Plan states TANF funds may be used to fund the expansion of the Families First Resource Centers. Through these centers, MDHS will advance the development, expansion and enhancement of a statewide network of communitybased, prevention focused, parent resource centers that offer assistance to families. To encourage the formation and maintenance of two-parent families and reduce out of wedlock pregnancies the centers will:         Provide early comprehensive support for parents; Promote the development of parenting skills; Promote the independence of families; Increase family stability; Improve family access to resources and opportunities for assistance; Focus on prevention of teenage pregnancy while supporting teen parents; Support the needs of families with children with disabilities; and, Provide a safe place for supervised children. Families eligible for this program are not required to be TANF eligible, but must be at or below 300 percent of the Federal Poverty Level. Exceptions/Questioned Costs: During testwork for activities allowed and allowable costs, the auditor noted the following violations:  MCEC expended federal grant monies to fund multiple sports programs. MCEC could not provide any documentation supporting the correlation of these sports programs to any of the four tenets of TANF, nor did MCEC utilize any criteria to establish eligibility for these programs. Additionally, as detailed below, the auditor does not consider the costs of some of the programs reasonable or necessary to meet federal requirements. o Favre Enterprises was contracted to appear at several events, record promotions, and provide autographs for marketing materials from July 1, 2017 through July 31, 2018. Additional contract information provided that the contract fee would be paid in installments and would include three (3) speaking engagements, Mississippi Department of Human Services April 22, 2020 19 P a g e one (1) radio spot and one (1) keynote address. There was no mention of the contract price in the contract supplied to auditors. When auditors requested further details on the performance of the contract, specifically the dates of any speaking engagements, MCEC provided a list of dates and events that fulfilled the contract terms; however, upon a cursory review of those dates, auditors were able to determine that the individual contracted did not speak nor was he present for those events. Two payments were made to Favre Enterprises – one for $500,000 in December 2017 and one for $600,000 in June 2018. Due to the inability to verify that any work was performed in order to fulfill the contract, and due to the unreasonable amount paid, the entire payment of $1,100,000 paid in FY 2018 is questioned. o Rick Rigsby Communications was paid $52,100 for motivational speaking in April 2019. No contract was provided to auditor; therefore, correlation to TANF cannot be verified. o Diamond Design and Construction was paid $42,750 in FY 2019 to convert and line Field 8 for the North Jackson Youth Baseball League. The field is located next to New Summit School, the school owned and operated by the Director of MCEC (NN). According to inquiry, Field 8 was often utilized as a baseball field for New Summit Academy. Due to the inability to verify that this work was related to TANF, including no correlation to any tenet of TANF, and due to the risk that this payment was made for the personal use of those involved with MCEC, this payment is questioned. o North Jackson Youth Baseball was paid $65,000 in FY 2017 to rent baseball fields. MCEC stated the amounts were a donation to the organization. Auditor noted that the Programmatic Director for MCEC (SP) and the spouse of one of the principals at MCEC (ZN) are currently on the Board of Directors of the baseball organization. Due to the inability to verify any correlation to TANF, including a programmatic reason for the payments, the provision against using TANF funds for intramural student activities, and the unreasonable amount paid, these payments are questioned. o P360 Performance Sports was contracted to allow four Jackson schools to use the baseball fields for practice and training. The schools listed in the contract are schools that operate in at-risk areas. However, based on inquiry with the vendor, these amounts also allowed for a specialty, private team (Mississippi Bombers) to use the field, thereby making at least a portion of the payments unallowable due to lack of ability to verify that the payments were for needy individuals. There was no allocation of payments to Mississippi Department of Human Services April 22, 2020 20 P a g e isolate the portion of the payment that would be allowable. Auditor was provided one contract for $125,000 for a six-month period in 2019; however, actual payments included $72,000 paid in FY 2018 and $146,750 in FY 2019. Due to the inability to verify any correlation to TANF, including a programmatic reason for the payments, the provision against using TANF funds for intramural student activities, and the unreasonable amount paid, these payments are questioned. o Overtime Sports was paid $37,500 for a sponsorship of a college tournament in FY 2019. Due to the inability to verify any correlation to TANF, including a programmatic reason for the payments, and the regulation noted above that sponsorships are disallowed under federal regulations, these payments are questioned. Questioned costs for fiscal year 2017 – $65,000 Questioned costs for fiscal year 2018 – $1,172,000 Questioned costs for fiscal year 2019 – $279,100  FRC expended federal grant monies to fund multiple sports programs. FRC could not provide any documentation supporting the correlation of these sports programs to any of the four tenets of TANF, nor did FRC utilize any criteria to establish eligibility for these programs. Additionally, as detailed below, the auditor does not consider the costs of some of the programs reasonable or necessary to meet federal requirements. o Metro Area Community Empowerment Foundation (MACE) was contracted for $75,000 for conference keynotes, wheelchair sports exhibitions, motivational speaking and community events. Actual payments of $10,000 were made in FY 2018. Due to the inability to verify any correlation to TANF, including a programmatic reason for the payments, these payments are questioned. o Bigger than Ball Foundation, Inc. was contracted to produce “Bigger than Ball Moments” by well-known coaches and to offer coaching clinics for a total of $62,500. Actual payments of $7,350 were made in FY 2018 and $4,439 were made in FY 2019 for a total of $11,789. Contracts and agreements for these payments did not offer any correlation to one of the TANF tenets or seek to verify that there was any eligibility or programmatic reason for these clinics. Mississippi Department of Human Services April 22, 2020 21 P a g e Due to the inability to verify any correlation to TANF, including a programmatic reason for the payments, these payments are questioned. o Retired Pro Football Players Charitable Foundation, Inc. was contracted for $75,000 to hold three (3) football camps for youth. Actual payments of $44,625 were made in FY 2018. Contracts and agreements for these payments did not offer any correlation to one of the TANF tenets or seek to verify that there was any eligibility or programmatic reason for these clinics. Due to the inability to verify any correlation to TANF, including a programmatic reason for the payments, these payments are questioned. o Northeast Mississippi Football Coaches Association was paid $30,000 in FY 2019 for a sponsorship of the NEMFCA All-Star game. Due to the inability to verify any correlation to TANF, including a programmatic reason for the payments, and the regulation noted above that sponsorships are disallowed under federal regulations, these payments are questioned. Questioned costs for fiscal year 2018 – $61,975 Questioned costs for fiscal year 2019 – $34,439 Total amount questioned in 2017 – $65,000 Total amount questioned in 2018 – $1,233,975 Total amount questioned in 2019 – $313,539 Payments Directed by Former Executive Director Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.318(c)) states that no employee, officer or agent of a grantee may participate in the selection, award, or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest. Conflicts of interest are defined as any instance when the officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated, has a financial or other interest in or a tangible personal benefit from a firm is considered for a contract supported by federal awards. The Code of Federal Regulations (2 cfr 200.53(b)) states “Improper payment includes any payment to an ineligible party, any payment for an ineligible good or service, any duplicate payment, any payment for a good or service not received (except for such payments where authorized by law), any payment that does not Mississippi Department of Human Services April 22, 2020 22 P a g e account for credit for applicable discounts, and any payment where insufficient or lack of documentation prevents a reviewer from discerning whether a payment was proper.” Signed subgrant agreements between MDHS and the subgrantees state in Section XXIX – Conflict of Interest - “Subgrantee must ensure that there exists no direct or indirect conflict of interest in the performance of the Subgrant. Subgrantee must warrant that no part of federal or state money shall be paid directly or indirectly to an employee or official of MDHS as wages, compensation or gifts in exchange for acting as an officer, agent, employee, subcontractor or consultant to the Subgrantee in connection with any work contemplated or pertaining to the Subgrant.” Section VI – Relationship of the Parties, states “It is expressly understood and agreed that MDHS enters into this Subgrant with Subgrantee on a purchase of service basis and not on an employer-employee relationship basis. Nothing contained herein shall be deemed or construed by MDHS, the Subgrantee, or any third party as creating the relationship of principal and agent, partners, joint venturers, or any similar such relationship between MDHS and the Subgrantee. Neither the method of computation of fees or other charges, nor any other provision contained herein, nor any acts of MDHS or the Subgrantee hereunder, creates or shall be deemed to create a relationship other than the independent relationship of MDHS and the Subgrantee. The MDHS Subgrant/Contract Manual, which subgrants must attest to have read and understood prior to receiving grant awards, states in Section 6, under the heading “Open and Free Competition” that “all procurement transactions shall be conducted in a manner that provides maximum open and free competition consistent with…applicable federal law. Procurement procedures shall not restrict or eliminate competition…Examples of what is considered to be restrictive of competition include, but are not limited to…noncompetitive contracts to consultants that are on retainer contracts…organizational conflicts of interest. Exceptions/Questioned Costs: During testwork for activities allowed and allowable costs, the auditor noted both MCEC and FRC often utilized the same contractors and awarded grants to common subgrantees. In some instances, joint contracts were issued under the “Families First” name, and in other instances, contracts were issued by both entities for the same scope and time period. Based on inquiry with the subgrantees and a review of documentation at MDHS, auditors determined that former Executive Director JD often directed MCEC and FRC to award contracts and grants to certain people or organizations. Contracts to these individuals or organizations were not procured using any type of competitive procurement and were not done in accordance with regulations defined in 2 cfr Part 200. Additional findings related to the procurement of these contacts can be found in finding #2019 - 039. Due to the known conflict of interest, and inability to determine if these contracts were reasonably priced due to lack of procurement and the lack of arms-length bargaining, these contracts and grants are questioned as described below.  Priceless Ventures, LLC and Familiae Orientem, LLC – A joint contract between MCEC, FRC and Priceless Ventures (PV) was structured under the name of “Families First of Mississippi” from June Mississippi Department of Human Services April 22, 2020 23 P a g e 1, 2017 through September 30, 2017. The scope of the contract included Priceless Ventures, LLC and its owner serving as “Leadership Outreach Coordinator” for the Families First Initiative cofounded by MCEC, FRC and MDHS. The contract was for $250,000 and was to be paid evenly by MCEC and FRC. Due to the overlapping scopes and time periods of all contracts made to PV by MCEC and FRC, auditor cannot determine which payments were made to satisfy specific contracts. The total amount paid will be summarized below. MCEC awarded additional contracts to Priceless Ventures, LLC and its owner for leadership development and the administration of a selfhelp program called “Law of 16.” According to “participant workbooks” created by MDHS to help administer the program, the program is a “model that is intended to help you understand - at a greater level, yourself, your values, your significance, and your potential.” MCEC awarded a “leadership training” contract from October 1, 2018 to September 30, 2019 in the amount of $130,000 and a contract for the self-help program from September 1, 2017 to August 31, 2018 in the amount of $130,000. In addition, MCEC paid for conferences and advertising to promote the self-help program to individuals and other state agencies. Travel expenditures for the owner of PV were also paid by MCEC. Travel costs included first class airfare, expensive meals, luxury hotels, and entertainment costs. Conference and travel expenses are questioned in full in their respective sections in this finding. Actual payments to Priceless Ventures for MCEC totaled $500,000 in FY 2018 and $199,500 in FY 2019. FRC also awarded contracts to PV from May 15, 2018 to September 30, 2018 in the amount of $500,000. The scope of the contract included “leadership outreach” and Law of 16 programs. Additionally, PV was awarded a contract from May 22, 2018 through September 30, 2018 from SNAP funds for “emergency food assistance.” According to inquiry with individuals at FRC, no work was performed on this contract, but payment of $497,987 (SNAP funds) was made in full to fulfill contract terms. FRC also reimbursed travel expenses related to these contracts and those amounts are questioned in full in its respective section of this finding. Actual payments to Priceless Ventures for FRC totaled $1,643,820 in FY 2018 and $104,167 in FY 2019. FRC also contracted with Familiae Orientem, LLC to conduct strategic development on a program created by MCEC, FRC, and MDHS called the “RISE Program.” The $1,000,000 contract was from June 25, 2018 through June 24, 2019, and the two payments of $350,000 in June 2018 and August 2018 on the contract were made to the owner of PV, who is also an owner of Familiae Orientem. According to inquiry with personnel at FRC, these payments were to cover a program designed by Executive Director JD and the owner of PV. JD directed these payments to be made before the program had Mississippi Department of Human Services April 22, 2020 24 P a g e been designed, and required staff from FRC, MCEC and MDHS to attend a “Legislative Launch” and “planning session” at the Westin Hotel in June 2018. The terms of the contract stated that Familiae would secure, at its sole expense, all personnel required to implement the agreement; however, based on documentation obtained from the planning session referenced above, the personnel designated to carry out the scope of the agreement were employees of FRC, MCEC and MDHS. Inquiry with MDHS supports FRC’s claim that, shortly after program launch, JD claimed the program would be taken “in house” at MDHS and that FRC and MCEC would no longer be involved. According to personnel at MDHS, the project was later abandoned. Actual payments totaled $350,000 in FY 2018 and $350,000 in FY 2019. Total amount paid by MCEC – $699,500 Total amount paid by FRC - $2,447,987 Above costs are questioned due to the direct involvement of MDHS personnel; thereby, violating the “Conflict of Interest” regulations in the MDHS Subgrant Manual. Additionally, auditor questions whether the costs are reasonable in the performance of the federal award, or whether the costs were made at arm’s length bargaining. Based on documentation provided, auditor cannot verify that work defined in the scopes of these projects was completed as MDHS did not properly monitor these grants or request documentation to support payments. Documentation obtained by auditor supports that no work was performed on portions of these contracts, even though payments were made in advance. Further, both FRC and MCEC contracted the same individual for the same services over the same time period, which indicate duplicative work charged to the federal grant. Finally, contract or supporting documentation does not define population served and whether it meets TANF eligibility criteria, nor can auditor find evidence of any direct or indirect correlation to the third or fourth tenets of TANF that do not require eligibility criteria. Questioned costs for fiscal year 2018 – $1,995,833 Questioned costs for fiscal year 2018 – $497,987 (SNAP) Questioned costs for fiscal year 2019 – $653,667  Heart of David Ministries (HOD) – MCEC donated $25,000 to HOD in two separate transactions. These payments were coded as a “sponsorship” and “contribution” in the accounting records, and no contract or subgrant agreement was provided to auditors. One payment of $15,000 was made in FY 2018 and one payment of $10,000 was made in FY 2019. Auditor could find no invoice or justification for these payments, nor was auditor provided any subgrant or contract to support these payments as anything other than donations. MDHS awarded subgrants to HOD Ministries in FY 2017, 2018, and 2019. HOD Ministries mission focuses on the personal development Mississippi Department of Human Services April 22, 2020 25 P a g e of young men, ages thirteen through nineteen. Programmatic material for the awards is similar in design to PV, both featuring the acronym “LYFE” or “Living Your Faith Extreme.” HOD is considered a faith based organization under federal standards. Grants to faith-based organizations are allowed under TANF regulations; however, any contract or grant agreement must include conditions to implement restrictions on explicitly religious activities. Auditor could find no such conditions in the contracts or subgrantee agreements made to HOD. Additionally, these subgrants were made at the express direction of former Executive Director JD, and the son of the Executive Director of HOD was employed as a Deputy Administrator at MDHS when the initial contract to HOD was awarded. The 2017 subgrant, from May 1, 2017 through April 30, 2018, was for $500,000; an additional subgrant, from May 1, 2017 through September 30, 2018, was for $1,500,000. The FY 2019 subgrant, from October 1, 2018 through December 31, 2019, was for $1,562,500. Actual payments were $271,349 in FY 2017; $900,000 in FY 2018 and $756,224 in FY 2019. These costs are questioned in Finding 2019-032. Above costs are questioned due to the direct involvement of MDHS personnel; thereby, violating the “Conflict of Interest” regulations in the MDHS Subgrant Manual. Additionally, auditor questions whether the costs are reasonable in the performance of the federal award, or whether the costs were made at arm’s length bargaining. Finally, while subgrant includes a needs assessment with a loose correlation to TANF, agreement does not define population served and whether it meets TANF eligibility criteria. Agreement also fails to include required certifications from a faith-based organization. Questioned costs for fiscal year 2018 – $15,000 Questioned costs for fiscal year 2019 – $10,000  Lobaki Foundation – A joint contract between MCEC, FRC and the Lobaki Foundation (Lobaki) was structured under the name of “Families First of Mississippi” from September 1, 2018 through August 30, 2019. The scope of the contract included forming a virtual reality academy in which students would be taught how to create and build virtual reality experiences. The initial cost of the academy was $635,000 with payments to be split evenly between MCEC and FRC. However, the entire contract sum was paid in a lump sum check by FRC in September 2018. MCEC entered into an additional agreement with Lobaki alone to expand the initial contract for an additional $160,000. The entire contract sum was paid in a lump sum check by MCEC in January 2019. Auditors were not supplied any supporting documentation for the initial contract by MCEC when requested, and reached out to the Mississippi Department of Human Services April 22, 2020 26 P a g e Lobaki Foundation for information. According to Lobaki, the academy was only contracted for a single two-semester course and ended at the conclusion of those semesters. According to Lobaki, 60 students graduated the academy at a cost of $13,250 per student. There was no eligibility determination made by either FRC or MCEC if the students enrolled in the academy were considered TANF eligible. Auditors were presented with email correspondence between MDHS Deputy Executive Director of Programs (JB) and FRC in which FRC is presented with the scope for the Lobaki project. When members of FRC staff noted they had questions about the project, JB told FRC that he had spoken with Lobaki, and that there was no need to discuss the contract further. FRC was supplied a signed contract and pressed for a timeline by MDHS. Additionally, auditors were presented with an email from Executive Director JD informing Lobaki that he would instruct “Families First” to wire transfer money to the Lobaki account, and apologized the payments had been stalled. Questioned costs for fiscal year 2019 – $795,000  Micah’s Mission School, Inc. – A joint contract between MCEC, FRC and Micah’s Mission was structured under the name of “Families First of Mississippi” from August 1, 2018 through July 31, 2019. The scope of the contract only included a description of the school as an “educational mission.” There was no description on what the grant funds would be utilized, and no determination on the population that would benefit. The school is a private school funded by fundraisers and tuition. The initial contract was for $150,000, with FRC covering costs in the first six months and MCEC covering costs in the second six months of the contract. Actual payments for FY 2019 included $50,910 in from FRC and $26,667 from MCEC for a total of $77,577. Questioned costs for fiscal year 2019 – $77,577  Victory Sports Foundation – MCEC entered into a contract with Victory Sports Foundation from October 1, 2018 through September 30, 2019 to conduct three 12-week fitness “bootcamps.” The contract amount was for $1,394,831 and included fitness programs in three separate counties. According to the supplied budget for the program, the contract fee was to pay for the staff/coaches of Victory Sports, a program design fee, equipment, onsite nurse, a $70,000 vehicle purchase, $20,000 trailer purchase, marketing and various other costs to administer the program. The materials provided did not indicate that any fees would be charged to participants in the program. However, review of documents received from Victory Sports indicated that participants in the fitness camps paid a fee to attend, and that no eligibility determination was made to verify participants were TANF eligible or needy. Additionally, the fitness program was offered to members of the Mississippi Legislature, other elected officials, and other political staffers for no charge. Auditor could see Mississippi Department of Human Services April 22, 2020 27 P a g e no evidence that participants of the program were aware that it was funded in part by federal grant monies. Actual payments included $1,309,183 in FY 2019. Questioned costs for fiscal year 2019 – $1,309,183  Fitness Program – FRC entered into a contract with an individual in order to assess and make recommendations concerning physical health and fitness components of Families Resource Centers of North Mississippi. The contract scope also included assessing and making recommendations for “growing feeding capacity in association with the Rise program” in conjunction with Familiae noted above. Auditor was not presented with a copy of the contract, but was provided the scope of the contract. The scope was emailed to FRC from Executive Director JD in June 2018. Actual payments on the contract totaled one lump sum payment of $100,000 on June 26, 2018. These costs are questioned due to the direct involvement of MDHS personnel; thereby, violating the “Conflict of Interest” regulations in the MDHS Subgrant Manual. Additionally, auditor questions whether the costs are reasonable in the performance of the federal award, or whether the costs were made at arm’s length bargaining. Finally, contract or supporting documentation does not define population served and whether it meets TANF eligibility criteria, nor can auditor find evidence of any direct or indirect correlation to the third or fourth tenets of TANF that do not require eligibility criteria. Questioned costs for fiscal year 2018 - $100,000  SBGI, LLC – SBGI was contracted by FRC from August 1, 2017 to July 31, 2018 to develop a “Center of Excellence” for Mississippi. The contract states that the Center will support and empower youth, whole families and veterans by aligning, optimizing and best leveraging existing programs, resources, initiatives and facilities to deliver the greatest outcomes and impact for individuals across Mississippi. The entire contracted amount of $250,000 was paid in one lump sum advance payment on August 28, 2017. Based on inquiry from FRC, this project was never completed. According to email correspondence from MDHS, the principal of SBGI was also contracted to perform services for Heart of David. These costs are questioned due to the direct involvement of MDHS personnel; thereby, violating the “Conflict of Interest” regulations in the MDHS Subgrant Manual. Additionally, auditor questions whether the costs are reasonable in the performance of the federal award, or whether the costs were made at arm’s length bargaining. Total contract fee was also paid in advance, and there is not supporting documentation to support that work was actually performed or completed on this project. FRC did not provide any documentation to support this payment other than the contract. Finally, contract or supporting documentation does not define population served and Mississippi Department of Human Services April 22, 2020 28 P a g e whether it meets TANF eligibility criteria, nor can auditor find evidence of any direct or indirect correlation to the third or fourth tenets of TANF that do not require eligibility criteria. Questioned costs for fiscal year 2018 - $250,000  Restore2/Recover2 – MDHS entered into a contract with Recover2, LLC from December 10, 2018 to June 9, 2019 for opioid training for MDHS employees. Recover2 is not registered as a business with the Mississippi Secretary of State; however, Restore2 is a registered business. All payments on the contract were made to Restore2, but the contract was for Recover2. Auditors concluded the contract contains a typographical error; however, it should be noted that contracts with businesses that are not properly registered, even if result of a typographical error, could not be considered legitimate contracts in the State of Mississippi. The contract amount was for $48,000 and included 24 “sessions” of opioid training over the six-month period. The entire contracted amount was paid from January 2019 through March 2019. Documents provided to auditors and investigators at the Office of the State Auditor revealed that the opioid trainings did not actually occur, and in fact, the principal of Restore2 who supposedly conducted the trainings was in a luxury rehabilitation facility in Malibu, CA at the time of the contract – see additional questioned costs below related to the payment of these services by MCEC. Evidence to support the payments on the contract (invoices, sign in sheets, etc.) was manufactured by individuals at MDHS. These payments were made at the direction of Executive Director JD - who visited the rehabilitation facility during the contract period, was aware the trainings did not take place, and was involved in a conspiracy to circumvent controls regarding these payments. These costs are questioned due to the fraudulent nature of the contract and the documentation that was fabricated to justify the payments. Personnel at MDHS willfully and deliberately circumvented existing controls in order to secure this contract and to assist in creating fraudulent documents to ensure payment of the contract. It should be noted that other MDHS employees reported suspicions about this individual’s contract to those charged with governance, who then alerted OSA to the possibility of fraud. OSA’s Investigative Division began an investigation immediately after the suspected fraud was disclosed. On February 5, 2020, Special Agents from OSA arrested Executive Director JD, the owner and Director of MCEC (NN), the Assistant Executive Director of MCEC (ZN), the accountant for MCEC (AM), the owner of Restore2 (BD), and another former employee of MDHS in connection with payments made to Restore2 and other payments made by MCEC (those payments are reflected in the section “Personal Benefit” below). Additionally, travel connected with these payments has been questioned under the section “Travel” Mississippi Department of Human Services April 22, 2020 29 P a g e and payments to the luxury rehabilitation center have been questioned below. $48,000 in costs are questioned in Finding 2019-032  Rise in Malibu – Rise in Malibu (Rise) is a luxury rehabilitation clinic located in Malibu, CA. The cost of the rehabilitation is $40,000 monthly, which includes the cost of treatment, room, and basic needs. The owner of Restore2 (BD), who was a former employee of MDHS, and Executive Director JD conspired to send BD to the facility for a four- month treatment due to his addiction to narcotics. While there, BD was under contract to conduct opioid addiction training classes to MDHS staff, as well as employed by MCEC. Executive Director JD and MCEC also conspired to use TANF funds to pay for BD’s stay at Rise. Personnel from MCEC wired four payments to Rise over a five-month period (February – June) of $40,000 each. MCEC coded this transaction to “curriculum” and named the facility “Rise-Malibu Training” in their financial records. After OSA began inquiring about the use of TANF funds in July 2019, the transactions were re-coded in the system to “consulting” and assigned “Bingo” (MCEC’s private income source) as to the source of funds. Regardless of the change in the system, TANF funds were used to fund the luxury rehabilitation center. Due to the personal nature of these expenses, the lack of any correlation to TANF purpose or eligibility criteria, the lack of reasonableness and the fraudulent nature of these expenditures, the $160,000 paid to Rise is questioned. Executive Director JD, BD, MCEC’s Director (NN), and MCEC’s Assistant Executive Director (ZN) have been indicted and charged with this alleged fraud and embezzlement. Questioned costs for fiscal year 2019 - $160,000 Total amount questioned in 2018 – $2,858,820 Total amount questioned in 2019 – $3,005,427 Curriculum Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.445(a)) states costs of goods or services for personal use of the entity’s employees are unallowable regardless of whether the cost is reported as taxable income of the employees. The Office of Family Assistance produced TANF-ACF-PI-2005-1 (Funding Childhood Education, School Readiness, Kindergarten, and Other Public Mississippi Department of Human Services April 22, 2020 30 P a g e Education Programs, published on April 14, 2005, clarifies the use of funds for educational programs. Per the guide, “public education is a State responsibility; therefore, States may not use Federal TANF for any educational activity that is a component of the State’s system of free public schools. By charging the Federal government for any part of these costs, the State would be passing on to the TANF program the costs of the State’s public education system…This prohibition applies regardless of the adequacy of funding for general public education from other sources.” Title XX of the Social Security Act establishes the Social Services Block Grant (SSBG). Services funded by SSBG must be directed at one or more of five (5) broad statutory goals: 1) Achieving or maintaining economic self-support to prevent, reduce, or eliminate dependency; 2) Achieving or maintaining self-sufficiency 3) Preventing or remedying neglect, abuse, or exploitations of children and adults unable to protect their own interest or preserving, rehabilitating, or reuniting families; 4) Preventing or reducing inappropriate institutional care by providing for community based care, home-based care, or other forms of less intensive care; and 5) Securing referral or admission for institutional care when other forms of care are not appropriate. The Office of Social Services Block Grant (SSBG) State Plan specifies that SSBG funds will be utilized by the MDHS Division of Aging and Adult Services and the MDHS Division of Youth Services. The State Plan specifies that a person is eligible for SSBG funds only if they meet income eligibility criteria, and have an identifiable need, unless the services are mandated services of serving children in the custody and guardianship of the Department of Child Protective Services. Exceptions/Questioned Costs: During testwork for activities allowed and allowable costs, the auditor noted the following questioned costs:  ActiveEd, Inc. – A joint Memorandum of Understanding (MOU) between MCEC, FRC and ActiveEd was structured under the name of “Families First of Mississippi” from July 1, 2018 through June 30, 2019. The purpose of the MOU was to order a pilot program of kinesthetic learning using physical activity to teach Math, English/Language Arts, and Literacy standards from pre-kindergarten through second grade. The pilot program was designed for schools or early childhood learning centers. The initial contract was for $250,000, with FRC and MCEC equally dividing the cost of the program. Actual payments for FY 2019 included one payment of $125,000 from MCEC in July 2018 and one payment of $125,000 from FRC in August 2018. Due to the inability to verify any stated correlation to TANF, supporting documentation about the program, and the regulation noted Mississippi Department of Human Services April 22, 2020 31 P a g e above that TANF money cannot supplant State’s educational responsibilities, these payments are questioned. Questioned costs for fiscal year 2019 - $250,000  Houghton Mifflin Harcourt – MCEC purchased $117,703 of “curriculum” from Houghton Mifflin Harcourt during fiscal year 2019. The funds were coded to “Curriculum Expense” in the general ledger, and the majority ($111,262) were paid with SSBG funds with the remaining $6,441 paid with TANF funds. MCEC’s SSBG grant request specifies an expense of $200,000 for “Curriculum and Supplies”; however, a review of actual invoices indicated that the curriculum purchased was used for the private school associated with MCEC, and not for the community at large. Due to the inability to verify that the goods and services purchased were used to meet grant requirements, the lack of documentation to verify an identifiable need or income eligibility, and the suspicion that the goods and services were converted to personal use by MCEC, these costs are questioned. Questioned costs for fiscal year 2019 – $111,262 (SSBG) Questioned costs for fiscal year 2019 – $6,441 (TANF)  Edmentum, Inc. – MCEC purchased $133,016 of “curriculum” from Edmentum during fiscal year 2019. The funds were coded to “Curriculum Expense” in the general ledger. Payments are for a digital curriculum and a “response to intervention” program for 1,500 students over a three-year time span. The payments are divided into 5 payments, the first and second payment each for $66,508. Only two payments were made as of June 30, 2019. Auditor could not verify that purchases were made for curriculum for the community at large and not the private school associated with MCEC. Due to the inability to verify that the goods and services purchased were used to meet grant requirements, the prohibition against supplanting State educational responsibilities with TANF funds, and the suspicion that the goods and services were converted to personal use by MCEC, these costs are questioned. Questioned costs for fiscal year 2019 - $133,016 Total amount questioned in 2019 – $500,719 Donations/Gifts/Sponsorships Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. Mississippi Department of Human Services April 22, 2020 32 P a g e The Code of Federal Regulations (2 cfr 200.434(a)) states the costs of contributions and donations, including cash, property, and services from the grantee to other entities are unallowable. The Code of Federal Regulations (2 cfr 200.469) states the costs of intramural activities, student publications, student clubs, and other student activities are unallowable, unless specifically provided in the Federal award. The Code of Federal Regulations (2 cfr 200.403(e)) states that in order for costs to be allowable under federal awards, they must be determined in accordance with generally accepted accounting principles (GAAP). GAAP includes the concept of “substance over form.” The substance over form concept means that the transactions recorded in the underlying financial records must reflect their economic substance rather than their legal form. Exceptions/Questioned Costs: During testwork for activities allowed and allowable costs, the auditor noted the following questioned costs:  University of Southern Mississippi Athletic Foundation - In October 2017, MCEC signed a “sublease” with the University of Southern Mississippi Athletic Foundation for $5,000,000 as “lease prepayments” for rental of a multi-purpose wellness center on the University’s campus. The lease’s term was for a five-year period from October 26, 2017 until July 31, 2022. At the time of the signing of the lease, the building had not yet been built, and the lease stated that the $5,000,000 was to fund certain additions, alterations and renovations to the new Wellness Center. The lease stated that MCEC would be permitted to use other University property in lieu of the Wellness Center until its construction was completed. The lease from the Athletic Foundation was then transferred to the University of Southern Mississippi (USM). The transfer of the lease was approved by the Institutes of Higher Learning (IHL) Board in their October 2017 Board Meeting. A review of the minutes of that Board Meeting state that the funding for the sublease between MCEC and the Athletic Foundation is from funding “via a Block Grant from the Mississippi Department of Human Services.” The facility was completed in December 2019, with USM expected to begin to utilize the space in January 2020. Auditors inquired of USM officials if MCEC utilized other University property, as described in the lease. According to USM’s records, MCEC utilized the Reed Green Coliseum one time for a Healthy Teens Rally on October 18, 2018. It is important to note that during the time of the “lease” to the Athletic Foundation, the Director of MCEC (NN) served as a Board Member to the Athletic Foundation. The $5,000,000 was paid to USM Athletic Foundation in two equal installments of $2,500,000 on November 6, 2017 and December 5, 2017. Mississippi Department of Human Services April 22, 2020 33 P a g e When the lease from USM Athletic Foundation was viewed under scrutiny, auditors determined that the substance of the $5,000,000 payment to USM is a donation to the USM Athletic Foundation for the construction of the Wellness Center and not a lease of the property. The property was leased almost three years before its construction was completed; the rent was prepaid in order to build the space; any additional use of the property was limited to one occurrence in a threeyear period; and the revenue did not appear to be classified as rental revenue on the USM Athletic Foundation form 990 (non-profit tax return). Questioned costs for fiscal year 2018 - $5,000,000  American Heart Association – MCEC funded various programs and initiatives of the American Heart Association through donations and sponsorships. The American Heart Association did not sign subgrantee agreements and was not considered a contractor of MCEC. Therefore, no reporting on the use of the funds was requested or required. Actual payments included $35,000 in FY 2017; $36,500 in FY 2018; and $24,000 in FY 2019 for a total of $95,500. As donations and sponsorships are prohibited as an allowable cost, the payments are questioned. Questioned costs for fiscal year 2017 - $35,000 Questioned costs for fiscal year 2018 - $36,500 Questioned costs for fiscal year 2019 - $24,000  The Library Foundation of Madison – MCEC donated $35,000 for a bookmobile/digital lab project in Madison County in June 2018. Supporting documentation for the transaction consists of a donor form wherein MCEC requested recognition on an engraved foundation stone in exchange for the donation. As donations and sponsorships are prohibited as an allowable cost, the payments are questioned. Questioned costs for fiscal year 2018 - $35,000  Fannin Fabrication Company/Mississippi State Highway Patrol (MS Hwy Patrol) – MCEC contracted and paid Fannin Fabrication Company $28,186 to build a “Rollover Simulator.” Total cost was paid in two equal installments of $14,093, one payment in FY 2018 and the second in FY 2019. The simulator was then donated to the MS Hwy Patrol. Inventory records from the MS Hwy Patrol verify that the two simulators are owned by the Patrol, and that one was donated. As donations and sponsorships are prohibited as an allowable cost, the payments are questioned. Questioned costs for fiscal year 2018 - $14,093 Questioned costs for fiscal year 2019 - $14,093  Mississippi Military Family Relief Fund – MCEC donated $10,000 to the fund in FY 2019. The transaction is coded to “Benevolence” in the Mississippi Department of Human Services April 22, 2020 34 P a g e general ledger. The fund did not sign subgrantee agreements, and was not considered a contractor of MCEC. Therefore, no reporting on the use of the funds was requested or required. Actual payments included $10,000 in FY 2019. As donations and sponsorships are prohibited as an allowable cost, the payment is questioned. Questioned costs for fiscal year 2019 - $10,000  Financial records of MCEC show that on December 7, 2018 a $3,000 check was written to the bookkeeper of MCEC using TANF funds. The payee in the financial records is left blank, and the copy of the cashed check shows the payee as the bookkeeper. The check was coded to “Seminars and Continuing Education” in the general ledger. However, check stub contains hand written note that $3,000 cash was given to Executive Director JD. Auditor was unable to verify the purpose of the $3,000 payment; therefore, the amount is questioned. Questioned costs for fiscal year 2019 - $3,000  MCEC paid $38,737 in small donations/sponsorships to various Booster Clubs, races, foundations, student activity clubs, etc. during FY 2019. As donations and sponsorships are prohibited as allowable costs, these payments are questioned. Amounts paid over $1,000 are detailed below: o Speaker for Hattiesburg Rally $1,250 o Murrah High School – Sound of Perfection Band - $1,000 o Greater Pine Belt Community Foundation – Full time tutors $13,200 o Papa John’s Pizza of South MS – Parade Float - $2,500 o Canton Educational Foundation – $7,000 o Junior League of Jackson – Touch A Truck - $2,500 o National Guard Association of Mississippi – ½ of sponsorship $2,500 o National Strategic Planning and Analysis Research Center – sponsorship of Cybernetic City - $2,500 Questioned costs for fiscal year 2019 - $38,737  FRC paid $16,680 in small donations/sponsorships to various Booster Clubs, pageants, student activity clubs during FY 2019. These payments are classified as “sponsorships” in the general ledger. As donations and sponsorships are prohibited as an allowable cost, these payments are questioned. Amounts paid over $1,000 are detailed below: o Tupelo High School Cross Country Booster Club – timing chips and readers - $5,350 o Baldwyn Baseball – sponsorship - $5,000 o Mississippi Municipal League – sponsorship - $1,000 o Child Advocacy Center – sponsorship - $2,000 o Baldwyn High School Cheerleaders – sponsorship - $1,000 o Johnie E. Cooks Foundation Initiative – sponsorship - $1,000 Mississippi Department of Human Services April 22, 2020 35 P a g e Questioned costs for fiscal year 2019 - $16,680 Total amount questioned in 2017 – $35,000 Total amount questioned in 2018 – $5,085,593 Total amount questioned in 2019 – $106,510 Publications Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.400 (g)) states that entities may not earn or keep any profit resulting from federal financial assistance, unless explicitly authorized by the terms and conditions of the award. The Child Care and Development Block Grant Act (CCDBG) authorized CCDF funds to be spent to achieve one of the following goals: 1) Protect the health and safety of children in child care, 2) Promote continuity of access to subsidy for low-income families, 3) Better inform parents and the general public about the child care choices available to them, and 4) Improve the overall quality of early learning and afterschool programs. Participants in the CCDF program and recipients of the benefits must meet defined eligibility criteria based on income and need. Exceptions/Questioned Costs: During testwork for activities allowed and allowable costs, the auditor noted the following questioned costs:  Bay View Funding/M&W Publishing (Bay View) – MCEC entered into a four-year commitment with Bay View to purchase copies of the book “Professional Grammar Simplified” in order to market and sell the book to organizations to whom MCEC was affiliated. The books were sold wholesale to MCEC, with the intent to resell for a profit. During the commitment, MCEC and M&W Publishing entered into a legal dispute. The dispute was settled in mediation, and MCEC returned any unsold publication inventory to M&W Publishing. Actual payments on the agreement totaled $905,000 in FY 2019. Due to the unreasonable nature of the expenditure, the intent to profit from the sale of the book in violation of Program Income regulations, and the lack of any direct correlation to TANF, these funds are questioned. Additionally, any legal fees paid in relation to these questioned costs are also questioned. Legal fees were paid to two separate law firms (Bradley Arant and Watkins & Eager) in the amount of $10,212 in FY 2019. Mississippi Department of Human Services April 22, 2020 36 P a g e Questioned costs for fiscal year 2019 – $915,212  Eli’s Christmas – MCEC purchased 2,600 copies of the children’s book in January 2019 using funds from the Mississippi Community College Board (MCCB) grant. These funds were pass-through CCDF funds through MDHS. MDHS and MCCB had a Memorandum of Agreement (MOA) to establish an Early Childhood Academy (ECA) at participating community colleges. The purpose of the ECA was to focus on preparing practitioners and parents to ensure children are prepared for successful transition from Pre-K to K-12. The MOA specifies that the ECA will provide professional development, technical assistance and coaching for practitioners and assist with Resource and Referral (R&R) Network offices around the state. R&R offices serve to facilitate the referral of parents and providers, and to assist members of the public for purposes of referral to an appropriate agency/entity for resources. Additionally, the scope of the agreement between MCEC and MCCB states that the work is to provide coaching, training, professional development, etc. The scope does not include any reference to providing materials to eligible children. The author of the children’s book is also related to the principal and owner of Restore2, LLC. Due to the relationship of Executive Director JD, the owner of Restore2 (BD) and the principals of MCEC, auditor cannot verify purchase was made at arm’s length bargaining or in good faith. Additionally, the scope of the projects does not include providing books to children, nor do the agreements make any correlation to the eligibility requirements of CCDF. Actual payments for the book totaled $44,964 in FY 2019. Questioned costs for fiscal year 2019 – $44,964 (CCDF) Total amount questioned in 2019 – $960,176 Purchases of Real Property/Construction/Assets Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.311(c)) states that real property that is purchased using federal funds must be used for as long as it is needed for the original purpose, and that the entity must not dispose or encumber its title or other interests. Further, when property is to be disposed, the entity must obtain disposition instructions from the federal awarding entity or pass through entity, and must provide for one of the following: Entity may 1) Retain title after compensating the federal awarding agency, 2) Sell the property and compensate the federal awarding agency, or Mississippi Department of Human Services April 22, 2020 37 P a g e 3) Transfer title to the federal awarding agency or an approve third party. The Code of Federal Regulations (2 cfr 200.439 (b)) states, “The following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass- through entity. (2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. (3) Capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency, or pass-through entity.” Decision of the Comptroller General of the United States, 42 Comp. Gen. 480 (1960) reiterates that a State may not use TANF funds to construct or purchase buildings, or facilities or to purchase real estate. Additionally, the guide “Q&A: Use of Funds, TANF Program Policy Questions and Answers” produced by the Office of Family Assistance states that this prohibition also applies to grantees and subrecipients including counties, nonprofit agencies, and contractors. The MDHS Subgrant/Contract Manual states in Section 7, that “all property and assets purchased through MDHS subgrants shall be placed on inventory in accordance with the statutes of the State of Mississippi and the rules set forth in the State Property Officers Manual.” Additionally, the manual states that all equipment purchased with subgrant monies must be specifically authorized through the Cost Summary and Budget Narrative portions of the subgrant agreement, and that any deviation requires a formal modification of the subgrant. The manual also states that any means of acquiring property shall be reviewed before any authorization by MDHS is given. Regarding property inventory, the manual details the following property inventory regulations: Cameras, Televisions, Computers – Any item $250 or over should be reported to MDHS on an Inventory Control Sheet, listed on MDHS inventory, and marked with a “Property of MDHS Sticker” Weapons, Two-Way Radios Equipment, Lawn Maintenance Equipment, Cellular Telephones, Chain Saws, Air Compressors, Welding Machines, Generators, Motorized Vehicles – Must be reported to MDHS on an Inventory Control Sheet, listed on MDHS inventory, and marked with a “Property of MDHS sticker” regardless of price. All other items purchased for over $1,000 with a useful life of over one year - Must be reported to MDHS on an Inventory Control Sheet, listed on MDHS inventory, and marked with a “Property of MDHS sticker” MDHS is responsible for conducting a periodic physical inventory of each subgrantee at least twice yearly, using the inventory control list submitted to Mississippi Department of Human Services April 22, 2020 38 P a g e MDHS. The manual also states that any property or equipment that is not being utilized or managed under the terms of the subgrant agreement and manual shall be recovered and redistributed. Lastly, the manual states that if a subgrant is terminated or not renewed, any equipment purchased under the subgrant with public funds or MDHS funds shall neither be transferred to another location nor remain at the present location under a new subgrant without prior written approval of the MDHS Executive Director, and that MDHS has the authority to recover the value of any missing property via demand on the head of the subgrantee agency, property officer or employee. Exceptions/Questioned Costs: Auditor initially used sampling techniques to audit equipment purchased with grant funds; however, the inadequate level of record keeping and incomplete inventory logs required additional procedures. In addition, due to the high risk of fraud, waste, and abuse assigned to subgrantees based on initial testwork, further types of auditing methodology were used. The results below encompass questioned costs under each testing method. During testwork for activities allowed and allowable costs, the auditor noted the following:  MD Foundation – MCEC entered into an agreement with MD Foundation for a sum of $371,000 on January 1, 2018 for “Equine Assisted Learning” and “Equine Assisted Activities”. The agreement does not have an expiration date and does not specify who the services will benefit, other than to state that individuals with mental or emotional disabilities benefit from equine training overall. On February 26, 2018, the owner of MD Foundation was paid $171,000. The transaction is classified as “Rent” in the underlying accounting records. Auditor was provided a general ledger by MCEC; however, that showed this payment coded to “Contractual Services” indicating that MCEC edited the general ledgers before supplying them to auditors. In both instances of recordkeeping, the payment was made from TANF funds. On April 13, 2018, MD Foundation purchased a residence with acreage in Flora, MS for a purchase price of $855,000. The loan amount for the purchase was for $684,000, $171,000 less than the purchase price. A down payment of $169,096 was made on the residence. Based on observation and inquiry, the residence appears to be the personal residence of the Director and Owner of MD Foundation. MCEC paid an additional $200,000 directly to the bank that holds the note on the residence, and, on June 1, 2018, the residence was refinanced for a total of $484,895. The check is coded to “Consulting” in the general ledger. This payment was also made from TANF funds. MCEC also guaranteed the residence through the bank with a six-year lease from April 1, 2018 through March 31, 2024. The lease was for the property in Flora purchased by MD Foundation and included $684,000 in lease payments at $9,500 monthly. The purpose of the Mississippi Department of Human Services April 22, 2020 39 P a g e lease was to operate a “multi use facility” at the residence. According to information in the Guaranty, the MCEC Board of Directors approved the Guaranty at a Board Meeting held on April 13, 2018. The Guaranty was signed by the Director of MCEC. Auditors could find no record of a Board Meeting held on that date during a review of the Board Minutes of MCEC and found no record of the Board Members approving a Guaranty in any provided Minutes. Additionally, MCEC later confirmed to auditor that no meeting was held on April 13, 2018. The Director of MCEC (NN) also personally guaranteed the loan of the residence. When auditors inquired of MCEC about payments made to MD Foundation and any payments made on the property in Flora, personnel at MCEC did not provide consistent answers. Initially, the Director of MCEC (NN) told auditors in November 2019 that MCEC had given MD Foundation a subgrant for equine learning, mentoring, and youth development activities, and that they had made only one payment of $171,000 to the foundation. In March 2020, Auditors then inquired about payments to MD Foundation again and were told on March 27, 2020 that MD Foundation was paid $171,000 for equine learning. They were also told MCEC had no involvement with the residence in Flora and that no payments were ever made on the $684,000 lease used to guarantee the property. MCEC stated that the loan was to be modified in July 2018 to remove the guarantee. On March 31, 2020, MCEC stated that they contracted MD Foundation in January 2018 for $371,000 for programmatic services and that a lease was executed in February 2018 for $9,500 monthly payments and that MCEC paid $200,000 directly to the Bank for lease payments. MCEC stated that MD Foundation began programmatic services in April 2018, and that the lease terminated December 31, 2019. Based on information provided over the course of the audit, MCEC asserts it paid $171,000 for equine learning services in February 2018 to be held on property that was not yet owned by MD Foundation. This payment was made in a lump sum advance, and services did not commence until April 2018. Additionally, MCEC paid $200,000 in lump sum, advance rental payments in order to lease the same property for use as a multi-use building. Based on fact patterns and documents reviewed, auditors believe that the initial payment of $171,000 was used by MD Foundation to secure the residence at the closing of the initial loan. MCEC and MD Foundation then refinanced the residence, and MCEC contributed another $200,000 to the purchase of the residence; thereby, using $371,000 of TANF funds to secure a personal, private residence for the Director and Owner of MD Foundation. It should be noted that the Director and Owner of MD Foundation was also employed by MCEC from July 17, 2017 until September 30, 2019 at an ending annual salary of $130,000. MCEC stated that he was employed as a “community liaison” during this time. MCEC paid $198,846 in salary payments and fringe benefits during this time Mississippi Department of Human Services April 22, 2020 40 P a g e period. Refer to “Salaries” section of this finding for the amount questioned for these salary payments. MD Foundation was also paid $3,100 in travel reimbursements in FY 2018 and payments of $2,700 for “loans” in FY 2019. Due to the prohibition against using federal funds for personal use, the prohibition of purchasing real property with TANF funds, and the unreasonableness of these purchases, the payments to MD Foundation are questioned in full. Questioned costs for fiscal year 2018 – $374,100 Questioned costs for fiscal year 2019 – $2,700  MCEC paid a contractor $134,880 in FY 2019 to demolish and renovate space at the North State Families First location. Due to the prohibition of using TANF funds to renovate real property, these purchases are questioned. Questioned costs for fiscal year 2019 – $134,880  Both MCEC and FRC purchased items that meet the thresholds in the MDHS Subgrantee Manual for inclusion on the “Physical Property Inventory” and did not report these items to MDHS, as required by subgrant requirements. These items included cell phones, televisions, equipment, etc. Since the items were never reported to MDHS, they were not listed on the Inventory Control Sheets and were not properly examined in a physical inventory of MDHS. Auditor attempted to examine physical property inventory at both locations. Inventory could not be verified at MCEC due to inadequate tracking and lack of identifiable information on assets and invoices, i.e. serial numbers. Property inventory was able to be verified at FRC due to adequate tracking and property listings.  MCEC purchased three vehicles using MDHS grants funds – o 2018 Armada for $52,257 in October 2018 – While the vehicle is registered to MCEC, the address for the purchase of the tag is the residence of the Director of MCEC (NN) indicating personal use of the vehicle. o Big Country Silverado Chevrolet Truck for $59,840 in September 2017 – While the vehicle is registered to MCEC, the address for the purchase of the tag is the residence of Assistant Executive Director of MCEC (ZN) indicating personal use of the vehicle. o F250 Ford Truck for $54,221 in November 2018 – While the vehicle is registered to MCEC, the address for the purchase of the tag is the residence of Director of MCEC’s son (JN), indicating personal use of the vehicle. This individual is not employed by MCEC. o MCEC also paid $6,584 in for maintenance contracts, repairs, and other costs associated with the vehicles in FY 2019. Mississippi Department of Human Services April 22, 2020 41 P a g e Through inquiry and observation, auditor determined these vehicles were treated as the primary vehicles for the Director of MCEC (NN), the Assistant Executive Director of MCEC (ZN) and the son of the Director of MCEC (JN). Due to the vehicles personal use, lack of any discernable allocation of the costs of the vehicles based on use, the reasonableness of purchase, and the lack of adherence to policies as described in the subgrant manual, these costs are questioned in full. Questioned costs for fiscal year 2018 – $59,840 Questioned costs for fiscal year 2019 – $113,062  Out of eight items of equipment purchases sampled at FRC, auditor noted: o Purchase of two vehicles, one for $50,415 and one for $27,749. The vehicles were purchased with entirely TANF funds. Auditor verified that vehicles were not used only for TANF purposes and that they were sometimes used for personal use. o Purchase of $27,093 in computer equipment. The equipment was purchased with MDHS grant funds. o Purchase of networking equipment for a total of $8,055. The equipment was purchased with MDHS grant funds. o Purchase of an air conditioning unit for $2,798, which is classified as “real property” under the federal grant. Due to improper allocation of costs and no appropriate underlying allocation methodology, and lack of adherence to the policies as described in the subgrant manual, the costs are questioned. Due to the auditor’s inability to calculate proper allocation due to insufficient documentation, the cost is questioned in full. Questioned costs for fiscal year 2019 – $116,110  Out of 100 items of equipment purchases sampled at MCEC, auditor noted: o Nine (9) items for a total of $2,334 in which MCEC could not provide documentation to support the expenditure. o Six (6) items for a total of $924 in which auditor could not find any correlation to the objectives of the TANF program for the equipment purchase. o Eighty-four (84) items for a total of $31,758 in which auditor could not determine item was used exclusively for the TANF program and/or what percentage of the items’ use was appropriate, reasonable and necessary for the TANF program. Due to lack of supporting documentation, improper allocation of costs and no appropriate underlying allocation methodology, and lack of adherence to the policies as described in the subgrant manual, the costs are questioned. Due to the auditor’s inability to calculate proper Mississippi Department of Human Services April 22, 2020 42 P a g e allocation due to insufficient documentation, the cost is questioned in full. Questioned costs for fiscal year 2019 – $35,016 Total amount questioned in 2018 – $433,940 Total amount questioned in 2019 – $401,768 Faith-Based Initiatives/Concerts Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (45 cfr 260.34(c)) states, “No Federal TANF or State MOE funds provided directly to participating organizations may be expended for inherently religious activities, such as worship, religious instruction, or proselytization. If an organization conducts such activities, it must offer them separately, in time or location, from the programs or services for which it receives direct Federal TANF or State MOE funds under this part, and participation must be voluntary for the beneficiaries of those programs or services.” The Code of Federal Regulations (2 cfr 200.438) states, “Costs of entertainment, including amusement, diversion, and social activities and any associated costs are unallowable, except where specific costs that might otherwise be considered entertainment have a programmatic purpose and are authorized either in the approved budget for the Federal award or with prior written approval of the Federal awarding agency.” Exceptions/Questioned Costs: During testwork for activities allowed and allowable costs, the auditor noted the following:  Under the “Families First” initiative, both MCEC and FRC funded concerts of a faith-based, evangelical worship singer in FY 2018 and FY 2019. Payments were made to the singer individually and the organization “Through The Fire Ministries”. The singer performed at rallies and performed concerts in churches in Mississippi. Auditors did not have a copy of the contracts associated with the payments. Actual payments included $1,050 paid in FY 2018 by FRC and $180,350 in FY 2019 ($85,400 paid by MCEC and $94,950 paid by FRC). MCEC also expended $3,783 in identifiable expenditures in conjunction with the concerts, including paying for meals, security, and an opening choir performance. Due to the prohibition against paying for entertainment costs of inherently religious activities such as worship, the lack of any correlation to TANF purpose, and the unreasonableness of the cost, these costs are questioned. Questioned costs for fiscal year 2018 – $1,050 Questioned costs for fiscal year 2019 – $184,133 Mississippi Department of Human Services April 22, 2020 43 P a g e  MCEC contracted with Sonshine Leadership, LLC to develop faith-based coalitions. One of the stated activities of the agreement was to “develop a prayer team for Mayors” and to receive and connect prayer requests to faithbased coalitions. Due to lack of supporting documentation, auditor cannot verify that work performed under the contract could not be categorized as “inherently religious” and therefore, the costs are questioned. Questioned costs for fiscal year 2019 – $61,826 Total amount questioned in 2018 – $1,050 Total amount questioned in 2019 – $245,959 Marketing/Branding/Advertising/Promotional Materials Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.438(b)) states, in part, “the only allowable advertising costs are those which are solely for…program outreach and other specific purposes necessary to meet the requirements of the federal award.” The Code of Federal Regulations (2 cfr 200.438(d)) states, in part, “the only allowable public relations costs are costs specifically required by the federal award, costs of communicating with the public and press pertaining to specific activities or accomplishments which result from the performance of the federal award, and costs of conducting general liaison with news media and government public relations officers, to the extent that such activities are limited to communication and liaison necessary to keep the public informed on matters of public concern, such as notices of funding opportunities, financial matters, etc.” The Code of Federal Regulations (2 cfr 200.438(e)) states, in part, “Unallowable advertising and public relations costs include the following: (1) All advertising and public relations costs other than as specified in paragraphs (b) and (d); (2) Costs of meetings, conventions, convocations, or other activities of the entity including costs of displays, demonstrations and exhibits; costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special events; and salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations and providing briefings. (3) Costs of promotional items and memorabilia, including models, gifts, and souvenirs; (4) Costs of advertising and public relations designed solely to promote the non-federal entity. The Code of Federal Regulations (2 cfr 200.422) states, “Costs incurred by advisory councils or committees are unallowable unless authorized by statute, the Federal awarding agency or as an indirect cost where allocable to Federal awards.” The MDHS Subgrant Agreement states in Section 9, under the heading “Compliance with Laws, Rules and Regulations” that any advertisements, brochures, flyers or produces any other material, printed or otherwise, relating to, or promoting, the Mississippi Department of Human Services April 22, 2020 44 P a g e services which is provided through the subgrant, it shall acknowledge that MDHS provided funding for the services. Exceptions/Questioned Costs: During testwork for activities allowed and allowable costs, the auditor noted the following:  Under the “Families First” initiative, MCEC and MDHS were provided branding, public relations, print media and advertising from the Cirlot Agency. Auditor was not provided a contract for these services, but was provided a “Families First for Mississippi Financial Update” from November 2019 that detailed the scope of work performed for MDHS, Family First Initiative and Families First Mississippi. The update stated that $1,199,310 had been billed for services, and was broken down as follows (Numbers below are copied verbatim from the invoice. Breakdown summary does not equal the total by category, and the amounts do not equal the amount billed. Errors in addition remain unchanged intentionally): o Families First for MS – $292,718  Collateral $17,919  Fundraising $61,974  Public relations - $10,576  Strategic Planning - $63,489  Video Production - $63,698  Website - $75,064 o Family First Initiative – $298,310  Summit Materials and Planning - $124,114  Strategic Planning - $54,805  Pilot Programs - $100,884  Steering Committees - $10,751  Website - $7,756 o Mississippi Department of Human Services - $608,088  Video Production - $247,111  Strategic Planning - $42,732  Branding and Positioning - $169,626  Law of 16 Events - $113,037  Public Relations - $6,539  Analytics - $29,043 Actual payments made by MCEC for the services included $206,000 in FY 2017, $369,438 in FY 2018 and $1,152,470 in FY 2019 for a total of $1,727,908, which does not agree with the summary provided to auditors. Auditors could find no record of payments made to Cirlot by MDHS directly. Based on inquiry with MDHS personnel, MCEC requested reimbursement for expenditures paid on their behalf based on a verbal “promise to pay” from Executive Director JD. MDHS, under the subsequent Executive Director (CF), denied any reimbursement request. However, MCEC still used TANF funds to pay for the services. Auditors, when possible with supporting documentation, viewed copies or video of advertising made in conjunction with this agreement. Auditors were not able to view all materials, however, due to lack of documentation. Auditors determined that promotional materials and advertising did not Mississippi Department of Human Services April 22, 2020 45 P a g e consistently abide by restrictions in the MDHS subgrant to include MDHS as a funding source, and did not consistently correlate advertisements to programmatic resources. Much of the advertising was designed to solely benefit MCEC and its nonprofit and not programs offered. Additionally, advertising was not appropriately allocated among different subgrants. Finally, some items charged by Cirlot are specifically prohibited in federal regulations (steering committees, promotional materials, fundraising) and should not have been paid by federal monies. Auditor also questions the reasonableness of the cost of services. Due to these reasons, the costs paid to Cirlot are questioned in full. Questioned costs for fiscal year 2017 – $206,000 Questioned costs for fiscal year 2018 – $369,438 Questioned costs for fiscal year 2019 – $1,152,470  MCEC entered into contractual agreements to advertise and sponsor NCAA college sporting events at Mississippi State University. Invoices for payments made to IMG College, LLC/Learfield indicate that the advertisements were at college football, basketball, and baseball games. In addition, advertising was also done for NCAA Final Four Championships and Bowl Games held out of state. In at least one instance, TANF grant funds were used to purchase tickets to a college football game. Total payments included $195,163 in FY 2018 and $121,393 in FY 2019 for a total of $316,556. Due to the unreasonableness of providing advertising for programs designed for the needy at college sporting events, lack of adherence to stipulations in the grant agreement, and the lack of any correlation to how the advertising benefited the programmatic nature of the TANF program, these costs are questioned. Questioned costs for fiscal year 2018 – $195,163 Questioned costs for fiscal year 2019 – $121,393  MCEC and FRC entered into contractual agreements to advertise with radio stations owned by Telesouth Communications. Invoices for payments indicate that the advertisements were for promotional campaigns, fundraising, and programmatic functions. The advertisements were sold in a “marketing package” whereas the price of the contract was billed in installments. Due to the packaged nature of the invoices and advertising, auditors cannot determine which costs should be allocated to programmatic functions and which charges were for advertising that solely benefited the entity. Payments included $57,950 in FY 2017, $49,886 in FY 2018, and $220,560 in FY 2019 for a total of $328,396 from MCEC. Payments included $36,680 in FY 2017, $53,721 in FY 2018, and $213,521 in FY 2019 for a total of $303,922 from FRC. Mississippi Department of Human Services April 22, 2020 46 P a g e Due to the unreasonable cost of the advertising, lack of adherence to stipulations in the grant agreement, inability to allocate costs of allowable and unallowable payments, and the lack of any correlation to how the advertising benefited the programmatic nature of the TANF program, these costs are questioned. Questioned costs for fiscal year 2017 – $94,630 Questioned costs for fiscal year 2018 – $103,607 Questioned costs for fiscal year 2019 – $434,081  Both MCEC and FRC utilized iPromoteU to provide promotional gifts and “swag” for conferences, booths, etc. These items were often branded as “Family First” and failed to denote that funds used for the cost of the items were from MDHS, as required by the subgrant agreement. Additionally, these items are prohibited as unallowable costs. Payments were made primarily from TANF funds, but CCDF and SSBG funds were also utilized as noted below. Payments included $23,569 in FY 2017, $94,789 in FY 2018, and $49,613 in FY 2019 for a total of $167,971 from MCEC. Payments included $3,137 in FY 2017, $11,197 in FY 2018, and $3,842 in FY 2019 for a total of $18,176 from FRC. Questioned costs for fiscal year 2017 – $26,706 Questioned costs for fiscal year 2018 – $105,393 Questioned costs for fiscal year 2018 – $593 (SSBG) Questioned costs for fiscal year 2019 – $52,455 Questioned costs for fiscal year 2019 – $1,000 (CCDF)  MCEC purchased additional advertising, marketing and promotional materials in FY 2019. Auditors sampled the remaining population of expenses classified as “Advertising” in the entities general ledgers. Auditors examined the invoices of nine additional advertising charges. When available, auditors viewed copies of the actual advertisements to determine what, if any, programmatic content was advertised. Auditors found that MCEC did not properly identify MDHS as the source of the funds nor did the advertising have a correlation to the TANF program. Sampled items totaled $13,090. Items are detailed below: o Clarion Ledger - $70 for digital ads o WONA radio station - $120 for ads o Ridgeland Chamber of Commerce - $40 for luncheon o Area Development Partnership - $250 for ad o House of Peace - $75 for pastor, minister, and leader conference o Busby Companies - $498 for billboards o WAPT - $12,037 for ads Questioned costs for fiscal year 2019 – $13,090 Mississippi Department of Human Services April 22, 2020 47 P a g e  FRC also had additional advertising expenditures; however, due to the inconsistency in how FRC accounting personnel coded expenses in the General Ledger, auditors could not perform a targeted sample of advertising expenditures. Any advertising expenditures sampled in the general population are discussed in the Section “Other Auditing Results” of this finding. Total amount questioned in 2017 – $327,336 Total amount questioned in 2018 – $774,194 Total amount questioned in 2019 – $1,774,489 Second Tier Subrecipients/Programmatic Subgrants Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.469) states the costs incurred for intramural activities, student publications, student clubs, and other student activities, are unallowable, unless specifically provided for in the Federal award. The Office of Family Assistance produced TANF-ACF-PI-2005-1 (Funding Childhood Education, School Readiness, Kindergarten, and Other Public Education Programs, published on April 14, 2005, clarifies the use of funds for educational programs. Per the guide, “public education is a State responsibility; therefore, States may not use Federal TANF for any educational activity that is a component of the State’s system of free public schools. By charging the Federal government for any part of these costs, the State would be passing on to the TANF program the costs of the State’s public education system…This prohibition applies regardless of the adequacy of funding for general public education from other sources.” The MDHS Subgrant Agreement states in Section 5, under the heading “Documentation Requirements” that “Source documents are required to support transactions entered into the subgrantees’ record keeping system. The following is a list of the minimum documentation required for selected transaction types:  Salaries & Fringe - Benefits Personnel files which include a job application or resume, IRS W-4 Form, State Tax withholding form, I9 Form (if hired after May 1987), e-verify confirmation, date of hire, and current approved salary/wage. Time distribution/activity sheets are required when the employee’s time is charged to more than one subgrant or activity. Time sheets and activity reports should reflect the actual hours worked and duties performed.  Travel - An approved travel voucher showing that all travel expenses were incurred for the benefit of the subgrant; copies of supporting bills including out-of-state meal receipts, hotel bills, conference registration fee receipts, and conference agendas.  Telephone - Complete telephone bills and long distance telephone logs that indicate the person calling, the person called, the date and Mississippi Department of Human Services April 22, 2020 48 P a g e time of the call, the reason and purpose of the call, the number called, and the subgrant that benefitted from the telephone call.  Equipment - Original vendor invoices, receiving reports, purchase orders, competitive quotes or proof of newspaper advertisements for bids (if applicable), property records, and authorization to purchase equipment, and any other documentation necessary for purchasing law conformity. All purchases of equipment must be made in accordance with state purchasing requirements.  Commodities (Supplies) - Original vendor invoices, receiving reports, purchase orders, competitive quotes or proof of newspaper advertisements for bids (if applicable), and documentation the expenses were incurred for the benefit of the subgrant.  Contractual Services - Original contracts for services charged to the subgrant, evidence of completion of contracts, billings for services, rental or lease agreements, competitive quotes or proof of newspaper advertisements for bids (if applicable), or documentation of fair market value.  Subsidies, Loans & Grants - (Payments to/for clients) Client attendance records, documentation of services provided, including dates, times, names, and client signatures, or documentation to verify units of service provided.  Other Direct Costs - Original vendor invoices, receiving reports, purchase orders, competitive quotes or proof of newspaper advertisements for bids (if applicable), and documentation the expenses were incurred for the benefit of the subgrant. Exceptions/Questioned Costs: Both MCEC and FRC awarded subgrants to “second tier subrecipients” during the grant period. Auditor reviewed programmatic scopes, payment requests, and supporting documentation to determine if agreements were made in accordance with provisions of Uniform Grant Guidance, grant regulations and restrictions, the initial subaward from MDHS, and whether the documentation adhered with the MDHS Subgrantee Manual. During this review, auditor found the majority of subgrantees of MCEC and FRC were not appropriately monitored, and that MCEC/FRC did not supply appropriate documentation for reimbursements or had inappropriate project narratives, scopes, etc. Most of the subgrant “packets” examined did not contain any type of correlation to the federal award objectives, nor did they contain client attendance records or documentation of the services provided. Many of the projects funded with appropriate scopes appeared to have performed work; however, documentation supporting that work was not sufficient for auditor to determine if it met the requirements to be allowable under the federal award. Additionally, while some of the projects may have community value and be considered worthwhile endeavors, auditor could not determine, from information provided, if the project/subgrant was a reasonable use of TANF, CCDF or SNAP resources, or if the program was limited to those defined as “needy” in both State or Federal regulations. It should be reiterated that, due to MCEC and FRC failing to denote on grant agreements that Mississippi Department of Human Services April 22, 2020 49 P a g e monies supplied were funded from federal programs such as TANF, second tier subrecipients could have not been aware of program restrictions and regulations. Based on these criteria, auditor has included these as questioned costs.  MCEC Subgrantee agreements did not contain scopes or projects, nor did they entail how the programs would benefit needy individuals, or the correlation to TANF. In some instances, auditor was provided copies of grants/contracts for prior years and in some instances, auditors were only provided current year agreements. While some payments below appear to exceed grant awards, auditors were only provided contracts for FY 2019, and it is possible FY 2018 agreements existed that allowed for additional monies to be spent. Contract dates also spanned multiple fiscal years; therefore, information regarding FY 2018 and FY 2019 are presented as questioned costs. o o o o o o o o o o o o o Belhaven University – Granted $250,000 for Leadership Development. Actual payments in FY 2019 were $236,023. Delta State University – Granted $700,002 over a two- year period. Scope unknown. Actual payments in FY 2018 were $238,796; and $344,807 in FY 2019. Friendship Connection – Granted $35,000. Scope unknown. Actual payments totaled $35,000 in FY 2019. Greenwood Community and Recreation Center – Granted $35,000. Scope unknown. Actual payments in FY 2018 totaled $62,166; and $43,891 in FY 2019. Gulf Coast Community Foundation – Granted $55,250. Scope unknown. Actual payments in FY 2018 totaled $82,167; and $36,883 in FY 2019. Jackson County Civic Action Agency – Granted $75,000 for ‘Youth development and mentoring’. Actual payments in FY 2018 totaled $194,554; and $124,215 in FY 2019. Juanita Sims Doty Foundation – Granted $1,000,000 over a twoyear period. Scope unknown. Actual payments in FY 2018 totaled $688,864; and $368,291 in FY 2019. Kid’s Hub – Granted $72,464. Scope unknown. Actual payments in FY 2018 totaled $41,120; and $45,309 in FY 2019. Meridian Community College – Granted $100,000. Scope unknown. Actual payments in FY 2018 totaled $36,672; and $96,022 in FY 2019. Mississippi Gulf Coast Community College – Granted $274,314 for ‘Training for middle skill job opportunities’. Actual payments in FY 2019 totaled $62,905. Mississippi Offender Re-Entry Program – Granted monies to establish a re-entry program for the Oakley Training Facility. Contract did not include an amount of funds granted. Actual payments for FY 2019 totaled $301,000. Pearl River Community College – Granted $260,193 for ‘Encourage work ready credentials or HSE diploma’. Actual payments for FY 2018 totaled $10,759; and $182,942 in FY 2019. Phoenix Project – Granted $45,000. Scope unknown. Actual payments in FY 2018 totaled $195,696; and $73,821 in FY 2019. Mississippi Department of Human Services April 22, 2020 50 P a g e o o o o o Picayune School District – Granted $50,000. Scope unknown. Actual payments in FY 2018 totaled $131,005; and $97,014 in FY 2019. Restoration Foundation – Granted $30,000 for addiction services. Actual payments for FY 2018 totaled $27,479; and $24,823 in FY 2019. Soul City Hospitality - $200,000 subgrant to create a community garden and to educate youth about sustainable agriculture. Actual payments totaled $200,000 in FY 2019. Tulane Missionary Baptist Church – Granted $25,000. Scope unknown. Actual payments in FY 2018 totaled $9,551; and $53,408 in FY 2019. Voice of Calvary – Granted $42,000 for ‘The Net Counseling and Mentoring’ services. Actual payments totaled $7,128 in FY 2018 and $30,948 in FY 2019. Questioned costs for fiscal year 2018 – $1,725,957 Questioned costs for fiscal year 2019 – $2,357,302  FRC Subgrantee agreements did contain scopes and/or project descriptions; however, some items in project scopes did not comply with allowable cost provisions and those grants are questioned below. In some instances, information provided by subrecipients details lists of participants in programs, including participant intake forms that contain information on eligibility; however, for some programs no conclusions were drawn on whether participants were eligible. Additionally, some intake forms detail wage information that makes participant ineligible for program. For those programs that did not draw conclusions on eligibility determinations and those that covered ineligible participants, the grants are also questioned below. o o o o Autism Center of North Mississippi – Granted $250,000 to provide a variety of services to children with autism. Many of the services provided do not meet allowable cost guidelines. Actual payments totaled $7,472 in FY 2018; and $99,732 in FY 2019. Baldwyn School District – Granted $577,163 for a variety of programs provided to children of the district. Many of the services provided do not meet allowable cost guidelines and services were not limited eligible participants. Actual payments totaled $158,574 in FY 2018; and $210,600 in FY 2019. Children’s Advocacy Center – Granted $579,180 to develop and increase child advocacy training studies at colleges and universities. Many of the services provided do not meet allowable cost guidelines and were not limited to eligible participants. Actual payments totaled $254,478 in FY 2018; and $48,913 in FY 2019. Kelly Williams Ministries – Granted $75,000 to assist women reentering the workforce after incarceration or addiction. Auditor could not determine if eligibility determinations were made for participants. Actual payments totaled $64,000 in FY 2019. Mississippi Department of Human Services April 22, 2020 51 P a g e o o o o o o o Mississippi State University – Three different subgrant agreements were provided to auditors; however, auditor could not discern based on supporting documentation from which of the three subgrants the payments were made; therefore, the total of all payments is presented. Actual payments totaled $595,482 in FY 2018; and $217,800 in FY 2019.  “Recruitment and Enrollment” – Granted $225,000 to recruit students into the Education programs at the university. Program does not meet allowable cost guidelines.  “Augmentative Communication” – Granted $150,188 to pay for the salaries of therapists. Program does not meet allowable cost guidelines.  “Dyslexia” – Granted $171,089 to pay for the salaries of therapists. Program does not meet allowable cost guidelines. Nettleton School District – Granted $150,000 to pay for curriculum, equipment and supplies. Program does not meet allowable cost guidelines. Actual payments totaled $48,201 in FY 2018. Prentiss County Library – Granted $144,800 to pay for the salaries of library personnel. Program does not meet allowable cost guidelines. Actual payments totaled $46,533 in FY 2018; and $93,067 in FY 2019. Regional Rehabilitation Center - Granted $500,000 to pay for the salaries of therapists. Program does not meet allowable cost guidelines. Actual payments totaled $263,995 in FY 2018; and $175,019 in FY 2019. Reviving Network – Granted $74,259. Scope only includes the requirement to report on grant’s progress. Auditor is unable to determine if program meets allowable cost guidelines. Actual payments totaled $31,096 in FY 2018; and $18,325 in FY 2019. Robinson Resource Center – Granted $60,000 to operate a community outreach center. Services provided are not limited to eligible participants. Actual payments totaled $8,835 in FY 2018; and $23,182 in FY 2019. Southeast Mississippi Children’s Advocacy Center – Granted $14,000 to develop and increase child advocacy training studies at colleges and universities. Many of the services provided do not meet allowable cost guidelines and not limited to eligible participants. Actual payments totaled $20,625 in FY 2018; and $11,371 in FY 2019. Questioned costs for fiscal year 2018 – $1,435,291 Questioned costs for fiscal year 2019 – $962,009 Total amount questioned in 2018 – $3,161,248 Total amount questioned in 2019 – $3,319,311 Personal Benefit/Conversion to Private Use Mississippi Department of Human Services April 22, 2020 52 P a g e Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.445 (a)) states that, “Costs of goods or services for personal use of the non-federal entity’s employees are unallowable regardless of whether the cost is reported as taxable income to the employees.” Exceptions/Questioned Costs: During the course of the audit, auditors became aware that MCEC was under investigation for the misuse of state and federal monies. Allegations against MCEC included the conversion of assets derived from federal grants to personal use. Auditors examined the financial records of MCEC, and concurred with the conclusion that some federal grant monies had been converted to personal use. The Director (NN) and Assistant Executive (ZN) Director of MCEC have both been indicted on charges of fraud and embezzlement and have been arrested. Both pleaded non-guilty and are currently awaiting trial. Auditor noted the following instances of alleged conversion of assets to personal use:  From a period of January 1, 2016 to June 30, 2019, MCEC transferred/paid a total of $6,513,393 in monies directly to the private business New Learning Resources, Inc. (NLR) which is owned and operated by the Director and Assistant Executive Director of MCEC. NLR operates in several different ways, including a website for online learning, New Learning Resource School Districts (NLRSD), and offers other educational services at the private school, New Summit School (NSS). A review of the transactions/transfers indicates that NLR and MCEC’s finances were commingled and intertwined in such a manner that MCEC often paid invoices addressed to personnel at NLR and sent to NLR’s physical address. Vice versa, some transactions indicate NLR paid for MCEC expenses and NLR was reimbursed for those charges. Auditor noted, however, that when NLR funds were used to pay for MCEC expenses, MCEC reimbursed NLR almost immediately, in many instances the same day. The balance for transactions paid by MCEC on behalf of NLR, however, continued to increase throughout the fiscal year. Some of the $6,513,393 was offset by credits for amounts paid by NLR on behalf of MCEC; however, the legitimacy of the credits could not be determined. MCEC utilized a variety of accounting transactions to allegedly conceal money transfers to NLR. As an example, general ledgers provided by MCEC to auditors and MCEC’s underlying financial records do not agree in regards to transactions to NLR. In multiple instances the underlying financial records refer to the payee on the transfer/check as New Learning Resources; however, the general ledger provided to auditors show the same transactions with varying vendor names. For example, in one instance the financial records show a payment to NLR on 01/08/2019 for $1,125 for catering of Highway Patrol meals; however, the same entry on the general ledger provided to auditors shows the payee of this transaction to be “Robert’s Catering.” In fact, any payments to NLR other than a $700,000 grant payment had been artificially removed from the general ledger provided to auditors. Mississippi Department of Human Services April 22, 2020 53 P a g e Additionally, there were numerous transactions in the general ledger provided to auditors that indicated that the payee on a check was American Express, showing the transaction to be a credit card charge; however, when auditors examined the actual bank statements of MCEC, the same transactions would be made out to NLR. Therefore, the American Express balance in the was overstated, and the amount paid to NLR was understated. The only discernable purpose of this deliberate mislabeling of transactions in the general ledger would be to conceal the number and amount of transactions flowing through from MCEC to NLR. General journal transactions were used to transfer money and set up a “Due from NLR” in the accounting system. The balance in the “Due from NLR” account has a $1,085,217 balance as of June 30, 2019, indicating that MCEC utilized grant monies of a minimum of $1,085,217 to fund NLR. In December 2018 alone, MCEC funded NLR a total of $275,000 in transfers coded as “Due from NLR.” On November 30, 2018, MCEC recorded a $700,000 transfer of TANF funds to NLR. The amount is coded as a general journal reduction in the amount owed to MCEC. When auditors inquired about the transfer, MCEC personnel provided a signed grant agreement from MCEC to NLR. However, investigators were able to verify that the document had been falsified, was not in existence at the time of the transfer, and that proceeds did not benefit NLR in a grant/subgrant relationship. When added with the balance of the “Due from NLR” account, the actual amount of MCEC funds used to fund NLR increases to $1,785,217. Auditors also reviewed invoices supplied by MCEC for fiscal year 2019, and were able to verify $73,514 of transactions that were paid using TANF Funds on behalf of NLR in addition to the amounts in the paragraph above. These costs included utilities, licenses, curriculum, etc. Without examining the records of NLR, auditors cannot determine what fiscal year these charges stem from and what year the grant costs should be questioned for any balance prior to 2017. Additionally, auditor cannot verify that these are the only amounts converted to private use without a thorough review of the records of NLR and MCEC in tandem. After analyzing the transfers and transactions in the ledger, auditor questioned the payments to NLR that were not offset by credits. Questioned costs for fiscal year 2018 – $473,622 Questioned costs for fiscal year 2019 – $1,326,267  The Director and Assistant Executive Director entered into a contract for $1,700,000 with the medical company, Prevacus, to purchase an investment in Prevacus and its affiliate PreSolMD. The company manufactures a brain concussion medicine. In exchange for the investment, Prevacus was to conduct clinical trials of the new medicine on children in Mississippi. The agreement was entered into by the Director (NN) and Assistant Executive Mississippi Department of Human Services April 22, 2020 54 P a g e Director of MCEC (ZN) in their personal capacity. An initial wire transfer of $500,000 was made on April 8, 2019 and a subsequent wire transfer of $250,000 was made on May 10, 2019. Original entries in the general ledger show that the payments were made with TANF funds; however, after State Auditor Investigators questioned the use of TANF funds in July 2019, the funding source was changed to “Bingo” in the accounting software. It should be noted that an additional $350,000 was paid in FY 2020. Questioned costs for fiscal year 2019 – $750,000  MCEC paid Magnolia Strategies, LLC, a company owned by the Director of MCEC’s son, $250,000 in “consulting” fees in both FY 2018 and 2019. Auditors were not provided a copy of any contracts for these fees, and, therefore, cannot determine what, if any, services were actually performed. All three checks were originally paid with TANF funds and coded as such in the accounting system. On July 16, 2019, after MCEC was first questioned about the use of TANF funds by State Auditor Investigators, the audit trail shows that a check written to Magnolia Strategies was re-coded in the system as “Administrative” funds. Questioned costs for fiscal year 2018 – $250,000 Questioned costs for fiscal year 2019 – $250,000  Auditors reviewed invoices supplied by MCEC for fiscal year 2019, and were able to verify $4,387 of transactions that were paid using TANF Funds on behalf of Spectrum Academy. Spectrum Academy is also owned by the Director of MCEC’s son. Additionally, $7,490 was paid in TANF funds for expenses of the Mississippi Dyslexia Center, which is also owned by the Director of MCEC’s son. No contracts or subgrants existed to justify these payments. Payments ranged from utility payments, advertising payments, licenses, meals, etc. Questioned costs for fiscal year 2019 – $11,877  Auditors were able to identify $118,022 in costs paid using TANF/CCDF funds for NSS in FY 2019. Of those funds, $70,228 were used to purchase kitchen equipment for the cafeteria of NSS, and $17,842 was used to purchase Apple Computer products for NSS. The remaining $29,952 was used to purchase various supplies, pay for utilities, purchase licenses, etc. Additionally, MCEC entered into contractual agreements with the University of Southern Mississippi (USM) to fund “externships” of students at the University through the School of Psychology. Externships allow individuals to study in a real-world work environment. According to press releases by USM and invoices supplied to auditor by MCEC, these externships were completed at NSS. Therefore, MCEC used TANF funds to pay for temporary workers at NSS. These invoices are billed to MCEC with the description “Spectrum I – Externships” and “Spectrum II”. These costs were coded as “consulting” and charged to the TANF grant. Total Mississippi Department of Human Services April 22, 2020 55 P a g e costs paid under these grants includes $526,146 paid in FY 2018 and $56,131 in FY 2019. Questioned costs for fiscal year 2018 – $526,146 Questioned costs for fiscal year 2019 – $174,153  On February 22, 2017, the Assistant Executive Director of MCEC borrowed $28,898 against the balance of his 403(b) pension plan at American Funds. The loan repayment included semimonthly payments of $264. Upon review of general ledger, payments were made from the Assistant Director to repay the loan in the amount of $1,489 for FY 2017, $6,380 for FY 2018, and $6,343 in FY 2019. According to MCEC personnel, these payments were deducted from the Assistant Executive Director’s gross pay; however, auditor determined that no deductions were made against his pay and that the charges were coded and charged to the TANF grant. It should be noted that another employee of MCEC had a loan against his 403(b) pension plan. His monthly payments were deducted from his gross pay, as required. Questioned costs for fiscal year 2017 – $1,489 Questioned costs for fiscal year 2018 – $6,380 Questioned costs for fiscal year 2019 – $6,343 Total amount questioned in 2017 – $1,489 Total amount questioned in 2018 – $1,256,148 Total amount questioned in 2019 – $2,518,640 Related Party Rent and Idle Facilities Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.446) states that the cost of “idle facilities” is an unallowable cost. Idle facilities are defined as facilities that are completely unused and to the excess of the entity’s current needs. The Code of Federal Regulations (2 cfr 200.465) states that rental costs are allowable to the extent that the rates are reasonable in light of rental costs of comparable property, market conditions, alternatives available, and the condition of the property. The Code of Federal Regulations (2 cfr 200.465(c)) states that rental costs under “less than arm’s length” leases are allowable only up the amount that is considered reasonable compared to similar property. It further defines a “less than arm’s length” lease as one where the lessor and lessee are under “common control” such as a situation involving two companies owned by the same individual, or the two companies owned by immediate family members. Family members, for the purpose of this regulation, are defined as (1) Spouse, and parents thereof; (2) Children, and Mississippi Department of Human Services April 22, 2020 56 P a g e spouses, thereof; (3) Parents, and spouses thereof; (4) Siblings, and spouses thereof; (5) Grandparents and grandchildren, and spouses, thereof; (6) Domestic partner, and parents thereof; (7) Any individual related by blood or affinity whose close association with the employee is equivalent of a family relationship. Exceptions/Questioned Costs: MCEC is owned and operated by the Director, and her son, the Assistant Executive Director. Together, they own Avalon Holdings, LLC (Avalon). The Director’s other son owns and operates 204 Key, LLC (Key). Both Avalon and Key own properties that are utilized by MCEC as places of business. Avalon owns three separate buildings that are utilized by MCEC; Key owns one.  Avalon owns the main building that is used as MCEC’s headquarters. In this shared space is a dentist office rented to an independent third party, MCEC, and New Learning Resource Online (NLRO), which is also owned by the Director of MCEC and her family. During the audit, auditors noted that the rental payments to Avalon seemed excessive considering market conditions, size of the property, condition of the property, and location of the property. After a search of business listings by the Mississippi Secretary of State’s Office, auditors confirmed that MCEC and Avalon were under common control, and, therefore, should only be able to charge “reasonable and comparable” rent for use of the building. Auditors requested a copy of the lease agreement, and were provided an unsigned agreement stating that monthly rent was $3,997. After requesting a signed copy of the lease, auditors were provided a new lease agreement that stated the monthly rent to be $16,000 per month for “operating a retail boutique” and stated the size of the property was 12,500 square feet. MCEC finally provided a lease agreement amendment that stated that the monthly rental payments were $27,466 monthly. Auditors were able to ascertain the square footage of MCEC’s utilized space, the square footage of the independent third party’s utilized space and the rent charged, and calculated a reasonable “per square foot” rent charge of $1.78 per square foot (monthly rent of $5,488 for 3,084 square feet of space for the independent third party). MCEC uses approximately 7,000 square feet, according to documents provided. These calculate to a reasonable, market value of rent to be $12,460 per month. Actual rental payments made to Avalon monthly for MCEC were $27,466 monthly, plus additional amounts paid on a sporadic basis. MCEC actually paid $357,061 in rental fees for FY 2019. Reasonable annual rent is calculated to be $149,520. $207,541, the portion of rent that is considered above market value, is questioned Additionally, rent is charged for a building close in proximity to the headquarters of MCEC. When auditors inquired about the purpose of the rent payments, MCEC informed auditors that the space was utilized for office space and intake assessments for Families First. However, based on a physical walkthrough and inquiry with NSS personnel, auditor determined that the building is utilized by the 4th grade classes at NSS, and is the location of the “Spectrum Academy” location inside NSS. Both NSS and Spectrum Academy are privately owned organizations by the Director Mississippi Department of Human Services April 22, 2020 57 P a g e of MCEC and her family. Rental payments for the building were $9,868 monthly, or $118,416 annually. As these facilities were used for personal businesses of the Director of MCEC and her family and has no correlation to TANF, the cost of rent payments is an unallowable cost. Additional rent payments were made in the ledger with no explanation as to why. Actual payments of $128,294 are questioned. Avalon also owns a property in Greenwood, MS, that is utilized by MCEC as a “Families First Resource Center.” Auditors were provided with a lease agreement stating monthly rent would be $2,000 (or $24,000 annually), and would be increased no more than 3 percent for the next year. Based on the initial amount of the lease plus the 3 percent increase, monthly rent should be no more than $2,060, or $24,720 annually. MCEC paid rental fees at $7,500, or $90,000 annually. Additionally, extra rental payments were made on a sporadic basis. Actual payments for the space totaled $97,806., an overpayment of $73,086. Questioned costs include the difference in what the lease agreement allowed ($24,720) and actual payments. Additional rent payments made to Avalon in the amount of $6,250 are also questioned as there is not a business purpose for the extra payments. Questioned costs for fiscal year 2019 – $415,171  MCEC paid monthly rental payments of $3,500 to Key for property located in Madison, MS. When a copy of the lease was requested by auditors, MCEC supplied a lease agreement for the property address between MCEC and Avalon Holdings, which is the incorrect lessor. The monthly amount of the lease on the agreement provided was $2,500, or $30,000 annually. Auditors inquired of the purpose of the rent payments, and were told that a “Families First Resource Center” was located at the address. Auditors did a physical walkthrough of the property and located no such center. The only property at the address was a Mississippi Dyslexia Center, which is also owned by the Assistant Executive Director of MCEC and the owner of Key. The Dyslexia Center is a fee-for-service therapy center and not related to TANF. Even though the agreement stated rent was $2,500 monthly, MCEC paid $3,500 monthly. Actual payments of $42,000 are questioned due to no valid TANF purpose. Questioned costs for fiscal year 2019 – $42,000  MCEC also entered into a lease for property at the “City Centre” in Jackson owned by Hertz Jackson City Centre, LLC (Hertz) in FY 2019. MCEC paid a $500,000 deposit for the property, and signed a lease for monthly payments of $20,274. The location was to be a “virtual reality school” run by the Lobaki Foundation. However, the contract for the “vr school” ended in July 2019, and no additional use for the property was identified; therefore, the location sat idle for FY 2019. MCEC continued to charge the rent for the idle facilities to the TANF grant. Actual payments, including the deposit, totaled $669,237. Due to the restriction of idle facility charges, the total amount paid on the lease is questioned. Mississippi Department of Human Services April 22, 2020 58 P a g e Questioned costs for fiscal year 2019 – $669,237 Total amount questioned in 2019 –$1,126,408 Travel for Specific Individuals Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.446) states “Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the non-Federal entity. Such costs may be charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied to an entire trip and not to selected days of the trip, and results in charges consistent with those normally allowed in like circumstances in the nonFederal entity’s non-federally-funded activities and in accordance with non-Federal entity’s written travel reimbursement policies.” The Code of Federal Regulations (2 cfr 200.446(b)) states “Costs incurred by employees and officers for travel, including costs of lodging, other subsistence, and incidental expenses, must be considered reasonable and otherwise allowable only to the extent such costs do not exceed charges normally allowed by the non-Federal entity in its regular operations as the result of the non-Federal entity’s written travel policy. In addition, if these costs are charged directly to the Federal award documentation must justify that: (1) Participation of the individual is necessary to the Federal award; and (2) The costs are reasonable and consistent with non-Federal entity’s established travel policy.” The Code of Federal Regulations (2 cfr 200.446(d)) states “Airfare costs in excess of the basic least expensive unrestricted accommodations class offered by commercial airlines are unallowable except when such accommodations would: (i) Require circuitous routing; (ii) Require travel during unreasonable hours; (iii) Excessively prolong travel; (iv) Result in additional costs that would offset the transportation savings; or (v) Offer accommodations not reasonably adequate for the traveler’s medical needs. The non-Federal entity must justify and document these conditions on a case-by-case basis in order for the use of first-class or business- class airfare to be allowable in such cases.” Exceptions/Questioned Costs: During the audit, auditors noted that certain individuals were reimbursed substantial travel costs when compared to other personnel. Additionally, due to the instances of fraud, waste, and abuse at MDHS, MCEC and FRC, certain individuals were assigned higher risk with travel reimbursements than everyday personnel. During testwork, the auditor noted the following questioned costs:  Priceless Ventures, LLC travel – The owner and operator of Priceless Ventures (TD) was reimbursed for travel from MCEC. The contracts with MCEC state that the contract price is all inclusive and do not detail policies Mississippi Department of Human Services April 22, 2020 59 P a g e for travel reimbursement. Nevertheless, travel made by TD for these contracts was reimbursed and charged to the TANF grant. A review of actual travel invoices showed that TD often flew first class, stayed in high priced hotel suites, and charged expensive meals for himself and others. In one instance, $607 for the “Oxford Grillehouse” was charged to the TANF grant. For fiscal year 2019, MCEC reimbursed $12,872 to TD for travel. Due to the unreasonable cost of the expenses, the lack of correlation to TANF purpose, and the violation of restrictions on airfare, these charges are questioned. Questioned costs for fiscal year 2019 – $12,872  BD travel – Aside from being the owner and operator of Restore2, LLC, BD was also employed by MCEC from July 1, 2018 to June 30, 2019. During his employment there, BD also submitted requests for reimbursement for travel. The travel reimbursement requests do not contain information to ascertain the relevance of the travel to TANF purposes. Additionally, a review of the actual travel invoices showed that BD often flew first class, stayed in high priced hotel suites, and charged expensive meals. During his employment, BD was reimbursed $31,808 of travel expenses. Due to the unreasonable cost of the expenses, the lack of correlation to TANF purpose, and the violation of restrictions on airfare, these charges are questioned. Questioned costs for fiscal year 2019 – $31,808  MCEC purchased a round trip, first class ticket for BD’s wife to fly to Los Angeles, CA, with BD on April 21, 2019. Flight arrangements were made by Executive Director JD’s Administrative Assistant and emailed to BD, with Executive Director copied on the email. During this time, BD was in addiction treatment in Malibu, CA at Rise in Malibu, as stated in the finding above. As there was no business purpose in the trip, BD’s wife was not an employee of MCEC, and given the restrictions on airfare, these costs are questioned. Questioned costs for fiscal year 2019 – $1,614 Total amount questioned in 2019 –$46,294 Salaries Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. The Code of Federal Regulations (2 cfr 200.445 (a)) states that, “Costs of goods or services for personal use of the non-federal entity’s employees are unallowable regardless of whether the cost is reported as taxable income to the employees.” Mississippi Department of Human Services April 22, 2020 60 P a g e The Code of Federal Regulations (2 cfr 200.53(b)) states “Improper payment includes any payment to an ineligible party, any payment for an ineligible good or service, any duplicate payment, any payment for a good or service not received (except for such payments where authorized by law), any payment that does not account for credit for applicable discounts, and any payment where insufficient or lack of documentation prevents a reviewer from discerning whether a payment was proper.” The Code of Federal Regulations (2 cfr 200.404) states “A cost is reasonable - if in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the entity is predominately federally funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the nonFederal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. (c) Market prices for comparable goods or services for the geographic area. (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost.” The Code of Federal Regulations (2 cfr 200.405 (a)) states “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.” The MDHS Subgrant/Contract Manual, which subgrants must attest to have read and understood prior to receiving grant awards, states in Section 5, under the heading “Documentation Requirements” that the minimum documentation requirements for salaries are time sheets and activity reports which reflect the actual hours worked and duties performed. Time distribution/activity sheets are required when the employee’s time is charged to more than one subgrant or activity. This section also states under the heading “Cost Allocation/Indirect Costs”, if MDHS subgrantee administers more than one subgrant at a time which results in costs that are shared among various subgrant programs and/or other funds such as local resources, the subgrantee must document the basis for allocating a portion of the shared costs to the MDHS subgrant and shall distribute the costs in a reasonable proportion to the benefits received. Exceptions/Questioned Costs: In order to test the salaries paid at MCEC, auditors requested a list of employees and their salaries. MCEC provided a list; however, the list did not contain job descriptions. Auditors then requested for the job descriptions to be added to the list. When auditors received the revised list with job descriptions, auditors compared the two lists and found that five employees on the first list were not on the second list, and some of the salary amounts changed. Mississippi Department of Human Services April 22, 2020 61 P a g e Two of the employees that were no longer listed were the daughters-in-law of the Director of MCEC (NN) – the Assistant Executive Director’s (ZN) wife, and the wife of NN’s other son, JN. Two of the other employees that were no longer listed were attorneys that also are employees at FRC, one of which was previously the Deputy Executive Director of MDHS under Executive Director JD and the other is the niece of the Executive Director of FRC. Further review of the underlying accounting records indicated that both daughtersin-law were each paid $31,667 in gross earnings (for a total of $63,333 in FY 2018) using TANF funds. This amount includes a check to each in the amount of $15,000 (gross) on September 29, 2017. The two attorneys reference above received approximately $181,000 in FY 2018 and $394,000 in FY 2019 from FRC; and received approximately $203,000 in FY 2018 and $208,000 in FY 2019 from MCEC. As discussed above, through the course of the audit, auditors became aware of the risk of TANF funds converted to personal use to fund private businesses owned by the Director of MCEC (NN), the Assistant Director of MCEC (ZN) and NN’s son JN. Auditors determined that there were several employees on MCEC’s payroll who were also listed as staff of New Summit School (NSS – owned by NN), Mississippi Dyslexia Center (owned by JN and ZN), and Spectrum Academy (owned by JN). The salaries of the employees identified were approximately $339,000 in FY 2017, $860,000 in FY 2018, and $944,000 in FY 2019. Also, as discussed above, the principal of Restore2 (BD) was also an employee of MCEC. In addition to the payments that were made to the rehabilitation facility, and the contractual payments made to BD by MDHS, BD continued to be paid $83,000 in salary payments by MCEC during the time period that he was in rehabilitation at Rise In Malibu. BD’s job description, as listed by MCEC, was “Trainer”. The average salary of all of the other employees with the “Trainer” job description was approximately $28,000. However, BD was receiving an annual salary of $250,000. The total amount paid to BD was approximately $208,000 in FY 2018, and $250,000 in FY 2019. The owner of MD Foundation (MD) discussed above was also an employee of MCEC. Initially, MCEC stated that MD was also a “trainer”, although, MCEC later stated that he was a “community liaison”. MD received an annual salary of $130,000. The amount paid to MD was approximately $104,000 in FY 2018 and $130,000 in FY 2019. MD was also an employee of FRC during the same period and received approximately $60,000 in FY 2018 and $59,000 in FY 2019. Due to the widespread fraud, waste, and abuse already discussed, the fact that MCEC attempted to conceal who was paid with TANF funds by editing the employee listing provided to auditors, the familial relationships of some employees with the owners of MCEC, the lack of any discernable work performed to earn the salaries of some individuals, and the unreasonable amounts of certain salaries, these costs are specifically questioned. In addition to these specific questioned costs, neither subrecipient had a reasonable, causal beneficial, underlying allocation methodology of the salaries to Mississippi Department of Human Services April 22, 2020 62 P a g e the multiple subgrants that they received. Nor did they have adequate supporting documentation to substantiate the allocations that were used. For this reason, we are questioning all of the salaries and wages paid as auditors cannot determine what a reasonable allocation would be based on the existing documentation. Total amount questioned in 2017 - $5,840,046 Total amount questioned in 2018 - $13,202,040 Total amount questioned in 2019 - $15,296,505 All Other Costs from MCEC Sampled Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. Exceptions/Questioned Costs: Auditors sampled and tested all other expense classes at MCEC for adherence to Uniform Grant Guidance allowability regulations. During testing, auditors noted that MCEC did not have an appropriate or auditable underlying methodology for allocating shared costs among multiple grants. Due to this lack of methodology, auditors could not verify the cost charged to the grant was reasonable or necessary. The items detailed below are questioned in addition to those items identified during a nomenclature review and detailed in the above paragraphs. During testwork for allowable costs and activities allowed, auditors noted the following questioned costs:  Awards, Banquets, and Events – Out of 12 items tested, auditors noted the following: o Three instances totaling $14,656 where documentation supporting the cost could not be provided; therefore, auditor could not determine if cost was allowable. o Seven instances totaling $54,480 where cost were determined questionable based on the reasonableness to the TANF program. Questioned Cost for fiscal year 2019 - $69,136  Consulting – One item was questioned: o One item totaling $100 was questioned in which the reasonableness and allowability of an expenditure could not be determined due to the agency not providing sufficient documentation for the expenditure. Questioned Cost for fiscal year 2019 - $100  Contract Labor – Out of 194 items tested, auditors noted the following: o Seven items totaling $450 were questioned due to auditor being unable to determine the need for the expense to the TANF program due to insufficient details in supporting documentation. o Sixteen items totaling $853 where MCEC was unable to provide a contract or agreement for the services provided. Therefore, auditor Mississippi Department of Human Services April 22, 2020 63 P a g e o was unable to determine the need or reasonableness to the TANF program. 179 items totaling $70,415 where MCEC was unable to provide a contract or agreement that the tutoring services performed were for work related to TANF eligible individuals. Questioned Cost for fiscal year 2019 - $71,718  Curriculum – One item was questioned: o One item totaling $15,750 was questioned in which the reasonableness and allowability of an expenditure could not be determined due to the agency not providing sufficient documentation for the expenditure. Questioned Cost for fiscal year 2019 - $15,750  Data Processing – Out of 5 items tested, auditors noted the following: o Five items totaling $5,100 in which costs were questioned due to 100 percent of the cost being charged to the TANF program. The subgrantee did not have a proper allocation plan and the auditor was unable to determine the percentage of the expense that is considered necessary and reasonable for the performance and administration of federal awards to the TANF program. Questioned Cost for fiscal year 2019 - $5,100  Dues and Subscriptions – Out of 5 items tested, auditors noted the following: o Three items totaling $139 where the expense was questioned based on the reasonableness to promote the objectives of the TANF program. o Two items totaling $355 where MCEC paid for expenses associated with a counselor licensure for an employee who was employed by New Summit School. Questioned Cost for fiscal year 2019 - $494  Equipment Rental – Out of 100 items tested, auditors noted the following: o Nine items totaling $2,334 were questioned in which the reasonableness and allowability of an expenditure could not be determined due to the agency not providing sufficient documentation for the expenditure. o Six items totaling $923 where the expense was questioned based on the reasonableness to promote the objectives of the TANF program. o Eighty-four items totaling $31,759 where costs were questioned due to 100 percent of the cost being charged to the TANF program. The subgrantee did not have a proper allocation plan and the auditor was unable to determine the percentage of the expense that is considered necessary and reasonable for the performance and administration of federal awards to the TANF program. Questioned Cost for fiscal year 2019 - $35,016 Mississippi Department of Human Services April 22, 2020 64 P a g e  Janitorial – Out of 6 items tested, auditors noted the following: o Six items totaling $3,295 where costs were questioned due to 100 percent of the cost charged to the TANF program. The subgrantee did not have a proper allocation plan and the auditor was unable to determine the percentage of the expense that is considered necessary and reasonable for the performance and administration of federal awards to the TANF program. Questioned Cost for fiscal year 2019 - $3,295  Meetings – One item was questioned: o One item totaling $200 where the reasonableness of the expenditure to promote the objective of the TANF program could not be determined. Questioned Cost for fiscal year 2019 - $200  Postage and Delivery – Out of 9 items tested, auditors noted the following: o Three items totaling $2,005 where costs were questioned due to 100 percent of the cost being charged to the TANF program. The subgrantee did not have a proper allocation plan and the auditor was unable to determine the percentage of the expense that is considered necessary and reasonable for the performance and administration of federal awards to the TANF program. Questioned Cost for fiscal year 2019 - $2,005  Professional Fees – Out of 3 items tested, auditors noted the following: o One item totaling $5,500 where costs were questioned due to 100 percent of the cost charged to the TANF program. The subgrantee did not have a proper allocation plan, and the auditor was unable to determine the percentage of the expense that is considered necessary and reasonable for the performance and administration of federal awards to the TANF program. o Two items totaling $135 where MCEC paid for expenses associated with an employee who was employed by New Summit School. Due to this and MCEC not having a proper allocation plan, auditor is unable to determine the percentage of charges that should be charged to the TANF program. Questioned Cost for fiscal year 2019 - $5,635  Repairs and Building – Out of 4 items tested, auditors noted the following: o Four items totaling $2,889 where the cost is unallowable as maintenance and repair cost. Per 2 cfr 200.452, costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its Mississippi Department of Human Services April 22, 2020 65 P a g e intended life are only allowable if these costs keep the building/property in an efficient operating condition. Questioned Cost for fiscal year 2019 - $2,889  Repairs - Other – Out of 2 items tested, auditors noted the following: o Two items totaling $1,330 where documentation supporting the cost could not be provided; therefore, auditor could not determine if cost was allowable. Questioned Cost for fiscal year 2019 - $1,330  Seminars and Continuing Education - Out of 10 items tested, auditors noted the following: o Five items totaling $492 where documentation supporting the cost could not be provided; therefore, auditor could not determine if cost was allowable. o One item totaling $150 where costs were determined questionable based on the reasonableness of the cost to promote the TANF program o Two items totaling $28,796 were questioned due to MCEC not having a proper cost allocation plan. Auditor could not determine the percentage of the expenditure that would be considered necessary and reasonable for the performance and administration of Federal awards. 100 percent of the expenditure should not be charged directly to the TANF grant due to salaries being a shared cost across multiple grants. Auditor also noted that due to the nature of expenditure reporting and record keeping, auditor could not determine if the cost was recorded to the correct reporting category, or used to meet the matching requirements of any other federal award. Additionally, auditor could not determine if the cost was consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities. Questioned Cost for fiscal year 2019 - $29,438  Repairs and Building – Out of 4 items tested, auditors noted the following: o One item totaling $1,106 where documentation supporting the cost could not be provided; therefore, auditor could not determine if cost was allowable. Questioned Cost for fiscal year 2019 - $1,106  Supplies – Out of 17 items tested, auditors noted the following: o Three items totaling $705 where documentation supporting the cost could not be provided; therefore, auditor could not determine if cost was allowable. o Five items totaling $339 where costs were determined questionable based on the reasonableness of the cost to promote the TANF program. Mississippi Department of Human Services April 22, 2020 66 P a g e o Nine items totaling $402 were questioned due to MCEC not having a proper cost allocation plan. Auditor could not determine the percentage of the expenditure that would be considered necessary and reasonable for the performance and administration of Federal awards. 100 percent of the expenditure should not be charged directly to the TANF grant. Auditor also noted that due to the nature of expenditure reporting and record keeping, auditor could not determine if the cost was recorded to the correct reporting category, or used to meet the matching requirements of any other federal award. Additionally, auditor could not determine if the cost was consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities. Questioned Cost for fiscal year 2019 - $1,446  Telephone – While reviewing invoices, auditors noted the following: o MCEC is paying a portion of each employees' phone bill; however, the methodology to determine how much is paid per employee is not properly documented. The fringe benefit is applied to all employees regardless of need in regards to TANF purposes. Additionally, it was noted that MCEC is also paying 100 percent of the phone bill for employees that are either not employed by MCEC, do not work full time for MCEC, or work for New Summit School or New Learning Resource center parttime. Auditors also noted that the telephone invoices also indicate that MCEC is paying for iPhones and iPad devices for NN (iPhone, iPad, and data for each), ZN (iPhone, two iPads, and data for each), ZN’s wife (iPhone and data), JN (iPhone and data), and JN’s wife (iPhone and data). MCEC was also paying monthly installments on two phones and for the iPhone data for the owner of Priceless Ventures, TD. Invoices also show that some employees’ are having their spouses and children’s phones, service, and iPhone data paid for using TANF funds – including the IT Director of MCEC’s (BB) own phone and data, his son’s data, and his daughter’s phone and data. Invoices show that MCEC paid monthly on installments on at least 25 different iPhones and iPads for employees. These devices ranged from iPhone 8s to iPhone XS’s, and from iPad minis to iPad Pros. Additionally, Federal Regulation requires expenses to be allocated to the projects based on the proportional benefit, and auditors have no assurance the cost associated with this benefit is being applied properly. Due to these factors, all amounts paid for telephone expense for FY 2019 are questioned. Questioned Cost for fiscal year 2019 - $61,389 Mississippi Department of Human Services April 22, 2020 67 P a g e  Telephone - Office – Out of 5 items tested, auditors noted the following: o Five items totaling $2,314 were questioned due to MCEC not having a proper cost allocation plan. Auditor could not determine the percentage of the expenditure that would be considered necessary and reasonable for the performance and administration of Federal awards. 100 percent of the expenditure should not be charged directly to the TANF grant due to salaries being a shared cost across multiple grants. Auditor also noted that due to the nature of expenditure reporting and record keeping, auditor could not determine if the cost was recorded to the correct reporting category, or used to meet the matching requirements of any other federal award. Additionally, auditor could not determine if the cost was consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities. Questioned Cost for fiscal year 2019 - $2,314 o Travel - Mileage – Out of 7 items tested, auditors noted the following: o Two items totaling $1,000 where documentation supporting the cost could not be provided; therefore, auditor could not determine if cost was allowable. o Five items totaling $675 where cost for the travel to the events, meetings, or trainings do not meet the needs or purpose of the TANF program. Questioned Cost for fiscal year 2019 - $1,675  Travel - Other – Out of 4 items tested, auditors noted the following: o One item totaling $229 was questioned due to the fact expense was to pay a speeding ticket incurred by the Director of MCEC (NN). Speeding tickets and/or fines and penalties are unreasonable, un-allocable, prohibited by state laws, and unallowable. o One item totaling $976 where documentation supporting the cost could not be provided; therefore, auditor could not determine if cost was allowable. o Two items totaling $211 were questioned due to the travel costs are for individuals who are not employees of MCEC. Questioned Cost for fiscal year 2019 - $1,416  Utilities – Out of 97 items tested, auditors noted the following: o One item totaling $52 where costs were determined questionable based on the reasonableness of the cost to promote the TANF program. o One item totaling $93 was questioned due to funds being used to pay a fine/penalty for unreturned satellite equipment. Fines and Mississippi Department of Human Services April 22, 2020 68 P a g e o penalties are unreasonable, un-allocable, prohibited by state laws, and unallowable. Ninety-five items totaling $17,830 were questioned due to MCEC not having a proper cost allocation plan. Auditor could not determine the percentage of the expenditure that would be considered necessary and reasonable for the performance and administration of Federal awards. 100 percent of the expenditure should not be charged directly to the TANF grant due to salaries being a shared cost across multiple grants. Auditor also noted that due to the nature of expenditure reporting and record keeping, auditor could not determine if the cost was recorded to the correct reporting category, or used to meet the matching requirements of any other federal award. Additionally, auditor could not determine if the cost was consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities. Questioned Cost for fiscal year 2019 - $17,975 Total amount questioned in 2019 –$329,427 All Other Costs from FRC Sampled Laws and Regulations: The Code of Federal Regulations (2 cfr 200.403) states that, in order to be allowable under federal guidelines, costs must be necessary and reasonable, and adequately documented. Exceptions/Questioned Costs: Auditors sampled and tested all other expense classes at FRC for adherence to Uniform Grant Guidance allowability regulations. During testing, auditors noted that FRC did not have an appropriate or auditable underlying methodology for allocating shared costs among multiple grants. Due to this lack of methodology, auditors could not verify the cost charged to the grant was reasonable or necessary. The items detailed below are questioned in addition to those items identified during a nomenclature review and detailed in the above paragraphs. During testwork for allowable costs and activities allowed, auditors noted the following questioned costs:  Commodities – Out of 12 items tested, auditors noted the following: o Ten items totaling $5,834 were questionable due to FRC not having a proper cost allocation plan. Auditor could not determine the percentage of the expenditure that would be considered necessary and reasonable for the performance and administration of Federal awards. 100 percent of the expenditure should not be charged directly to the TANF grant due to salaries being a shared cost across multiple grants. Auditor also noted that due to the nature of expenditure reporting and record Mississippi Department of Human Services April 22, 2020 69 P a g e o o keeping, auditor could not determine if the cost was recorded to the correct reporting category, or used to meet the matching requirements of any other federal award. Additionally, auditor could not determine if the cost was consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities. One item totaling $222 where costs were determined questionable based on the reasonableness of the cost to promote the TANF program. One item totaling $65 where documentation supporting the cost could not be provided; therefore, auditor could not determine if cost was allowable. Questioned Cost for fiscal year 2019 - $6,121  Contractual – Out of 4 items, auditors noted the following: o Three items totaling $3,512 were questionable due to FRC not having a proper cost allocation plan. Auditor could not determine the percentage of the expenditure that would be considered necessary and reasonable for the performance and administration of Federal awards. 100 percent of the expenditure should not be charged directly to the TANF grant due to salaries being a shared cost across multiple grants. Auditor also noted that due to the nature of expenditure reporting and record keeping, auditor could not determine if the cost was recorded to the correct reporting category, or used to meet the matching requirements of any other federal award. Additionally, auditor could not determine if the cost was consistent with policies, regulations, and procedures that apply uniformly to improper or if it conformed to the limitations of 2 CFR part 200, subpart E. Additionally, adequate documentation for two of the items supporting the cost could not be provided; therefore, auditor could not determine if cost was allowable. o One item totaling $2,667 where funds were used for promotional items which are unallowable according to 2 CFR 200.431. Additionally, adequate documentation supporting the cost could not be provided; therefore, auditor could not determine if cost was allowable. Questioned Cost for fiscal year 2019 - $6,179  Equipment – Out of 8 items tested, auditors noted the following: o Eight items totaling $116,110 were questionable due to FRC not having a proper cost allocation plan. Auditor could not determine the percentage of the expenditure that would be considered necessary and reasonable for the performance and administration of Federal awards. 100 percent of the expenditure should not be charged directly to the TANF grant due to the equipment being a shared cost across multiple grants. Auditor also noted that due to the nature of expenditure reporting and record keeping, auditor could not determine if the cost was recorded to the correct reporting category, or used to meet the matching requirements of any other federal award. Additionally, auditor could not determine if the cost was consistent with policies, regulations, and procedures that apply uniformly to improper or if it conformed to the limitations of 2 CFR part 200, subpart E. Mississippi Department of Human Services April 22, 2020 70 P a g e Questioned Cost for fiscal year 2019 - $116,110  Travel – Out of 12 items tested, auditors noted the following: o Two items totaling $4,605 were questionable due to FRC not having a proper cost allocation plan. Auditor could not determine the percentage of the expenditure that would be considered necessary and reasonable for the performance and administration of Federal awards. 100 percent of the expenditure should not be charged directly to the TANF grant due to the travel being a shared cost across multiple grants. Auditor also noted that due to the nature of expenditure reporting and record keeping, auditor could not determine if the cost was recorded to the correct reporting category, or used to meet the matching requirements of any other federal award. Additionally, auditor could not determine if the cost was consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities. Questioned Cost for fiscal year 2019 - $4,605 Total amount questioned in 2019 –$133,015 Due to the widespread fraud, waste, and abuse uncovered during the audit, and the lack of any appropriate underlying methodology for the allocation of shared costs in both MCEC and FRC, the overall lack of documentation to establish reasonableness and necessity of costs, the lack of integrity in documents obtained from MCEC due to known instances of forgery, misdirection, document modification, etc., the direct involvement of MDHS personnel in the fraud, waste, and abuse, and the likelihood of additional fraud, waste, and abuse existing in the actions of these subrecipients, auditor cannot state, with reasonable assurances, the amount of grant costs for the TANF grant were used appropriately. Known questioned costs, as detailed in the finding above: For fiscal year 2017: $6,333,044 (TANF) For fiscal year 2018: $28,419,923 (TANF) For fiscal year 2019: $31,155,361 (TANF) For fiscal year 2018: $593 (SSBG) For fiscal year 2019: $111,262(SSBG) For fiscal year 2018: $497,987 (SNAP) For fiscal year 2019: $139,564 (CCDF) Likely questioned costs include total amounts paid to MCEC and FRC for TANF, CCDF and SNAP awards less any amounts questioned in other allowable cost findings in this report. The total has been reduced by those questioned costs to ensure the same dollar is only questioned one time. Chart below shows amounts actually paid to MCEC and FRC as of June 30, 2019. Amounts paid could be less than grant awards listed in the “Background” section of the finding due to timing differences in the State/Federal fiscal years. Mississippi Department of Human Services April 22, 2020 71 P a g e Total Paid 2019 TANF CCDF SNAP 2018 TANF SNAP SSBG 2017 TANF Total Less Amount Questioned in Other Finding Total Questioned $26,517,614 $ 6,576,057 $ 1,144,953 N/A $3,529,915 $684,598 $26,517,614 $ 3,046,142 $ 460,355 $34,801,286 $ 497,987 $ 6,900,000 N/A N/A N/A $34,801,286 $ 497,987 $ 6,900,000 $21,941,224 $98,379,121 N/A $4,214,513 $21,941,224 $94,164,608 All information related to this audit finding has been referred to the Mississippi Office of the State Auditor Investigative Division, the United States Department of Justice, the Office of Inspector General for the United States Department of Health and Human Services, and the Federal Bureau of Investigation. Cause Executive Director JD circumvented internal controls set in place by MDHS in regards to procurement, monitoring, and other allowable costs controls in order to direct monies to certain subrecipients, who then directed federal monies to individuals associated with JD. Additionally, JD used his position as Director to convince employees at MDHS to collude with him in circumventing controls. MDHS, in turn, did not appropriately monitor or review expenditures at the subrecipient level to ensure adherence to allowable cost and activities allowed guidelines. Personnel at MDHS are not properly trained or educated in regards to allowable cost provisions. Lastly, personnel at MDHS either disregarded established policies and procedures, or were not aware policies and procedures existed. Effect Due to high risk of additional fraud, waste, and abuse other than what has been reported to authorities or detailed in this report, auditor questioned the entire grant award amounts to certain subrecipients. Uniform Grant Guidance includes remedies for non-compliance with federal regulations, including, but not limited to, requesting a dollar for dollar reduction in the subsequent year’s grant award for any money misappropriated or misspent under the Temporary Assistance for Needy Families Grant. Additionally, the widespread fraud, waste, and abuse has led to public distrust of MDHS, and a loss of integrity in the public welfare system in the State of Mississippi. Recommendation We recommend the Mississippi Department of Human Services take swift and immediate action to re-instill trust in the public welfare system in Mississippi by doing the following actions: 1) Pursue any legal remedies available against those that have contributed to the widespread fraud, waste, and abuse detailed in this report; 2) Pursue any legal remedies to seize property at MCEC and FRC that was purchased with federal monies in accordance with the policies of the MDHS Subgrant Manual; 3) Procure an independent certified public accounting firm to conduct a Mississippi Department of Human Services April 22, 2020 72 P a g e 4) 5) 6) 7) widespread forensic audit of MDHS to determine the extent of fraud, waste, and abuse in other programs, as well as the TANF program, and of MCEC and FRC to support any attestation made by MDHS of the allowability of costs, and report any suspected criminal activity to the Mississippi Office of the State Auditor; Conduct internal investigations to determine the pervasiveness of the knowledge and involvement of former and current MDHS staff in the widespread fraud, waste, and abuse, and report any suspected criminal activity to the Mississippi Office of the State Auditor; Strengthen existing controls to ensure non-compliance with federal regulations does not continue; Procure adequate and appropriate training for all staff who are involved in any federal allowable costs and activities allowed monitoring; Increase awareness in subrecipients of allowable cost and activities allowed regulations. Views of Responsible Officials Material Weakness Material Noncompliance 2019-031 Strengthen Controls to Ensure Compliance with Allowable Cost Requirements of the Supplemental Nutrition Assistance Program (SNAP). CFDA Number 10.551 Supplemental Nutrition Assistance Program (SNAP) Federal Award No. 1283505 (2018 E&T 50%) 1293505 (2019 E&T 100%) Federal Agency U.S. Department of Agriculture Questioned Costs $684,598 Criteria Per MDHS’ Subgrant/Agreement Manual Section 5, “The accounting system of each MDHS subgrantee shall provide the monitors/auditors with adequate documentation to support the subgrantee’s financial claims. Source documents are required to support transactions entered into the subgrantee’s record keeping system. The following is a list of the minimum documentation required for selected transaction types: …Time sheets and activity reports which reflect the actual hours worked and duties performed. Time distribution/activity sheets are required when the employee’s time is charged to more than one subgrant or activity. An approved travel voucher showing that all travel expenses were incurred for the benefit of the subgrant; copies of supporting bills including out of state meal receipts, hotel bills, conference registration fee receipts, and conference agendas.” Per the Code of Federal Regulations, Title 45- Subtitle a- Subchapter A- Part 200.431, “Pension Plan Costs. Pension plan costs which are incurred in accordance with the established policies of the non-Federal entity are allowable, provided that: (1) Such policies meet the test of reasonableness.” Mississippi Department of Human Services April 22, 2020 73 P a g e Per the Code of Federal Regulations, Title 45-Subtitle A- Subchapter A- Part 200.404, “A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federallyfunded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award…..” Per the Code of Federal Regulations, Title 45-Subtitle A- Subchapter A- Part 200.405, “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award...” Condition During testwork performed related to SNAP Activities Allowed and Allowable Costs, auditor noted 31 instances in which MDHS made reimbursement payments to Mississippi Community Education Center (MCEC) for salary, travel, fringe benefits and education related expenses for an agreement MCEC entered into with a KLLM Transport Services (KLLM) to provide training to SNAP Employment and Training (E&T) participants. Allowability of these activities or costs could not be determined due to the following: 1. MCEC did not provide timesheet information to support the allocation of salary percentages, nor did it provide supporting documentation relating to travel expenditures. Information provided to auditors by MCEC and information provided to MDHS by MCEC did not agree in relation to salary and wages applied to the grant. 2. The Fringe rate of 26.65 percent used by MCEC includes an unreasonable percentage of contributions to a 403(b) plan, including a profit sharing contribution for the Executive Director (NN) and Assistant Executive Director of MCEC (ZN). 3. Fraud, waste, and abuse noted during review of MCEC that included both reimbursement and accounting recorded falsification. MCEC initially submitted reimbursement for KLLM expenses at $8,000 per student cost. When advised that the $8,000 cost was too high, MCEC submitted new documentation at $4,000 and documentation for a new program for the exact amount of unallowed expenditures in the prior submission. Personnel from KLLM stated that this additional training never occurred. 4. MCEC comingled federal and private funds, as well as lacked a proper cost allocation system. The total of the questioned costs amounts to $684,598. Due to the issues stated above, auditor could not determine if the costs associated with this subrecipient were allowable, allocable or reasonable to the SNAP program. Additionally, due to inadequate internal controls regarding payments to subrecipients, MDHS erroneously advanced a payment in the amount of $2,615,774to MCEC on the grant. MCEC returned the payment; however, MCEC continued to submit payment requests on the grant. These requests were paid using Mississippi Department of Human Services April 22, 2020 74 P a g e the contractual services line item of MDHS’ budget rather than the “Amount Transferred to Subgrantee” account. Therefore, $511,120 was paid to MCEC using the appropriate subgrant requests and accounts, and an additional $173,478 was reimbursed using contractual services. Using the wrong accounts can result in an overpayment of the grant award. As referenced in Finding 2019-030, the entire amount of SNAP grant funds paid to MCEC is questioned. The questioned costs for this finding were deducted from the total to ensure that the same costs were not questioned twice. Cause The Former Executive Director circumvented controls and disregarded policies and procedures related to activities allowable and allowable costs in relation to expenditures made for Mississippi Community Education Center. Additionally, MDHS staff were either unaware or incompliant with their own policies and federal codes of regulations. Effect Failure to verify expenditures are allowable, appropriately pay expenditures out of federal or private funds, and allocate costs correctly can lead to federal funding being withdrawn or expenditures being paid with incorrect funds. This can also lead to fraud, waste, and abuse within an agency. Recommendation We recommend the Mississippi Department of Human Services strengthen control procedures in order to properly verify expenditures are allowable and appropriate. We also recommend that the agency appropriately pay expenditures out of the correct federal or private funds and allocate the funds correctly across all expenditures. Repeat Finding No. Statistically Valid The sample is considered statistically valid. View of Responsible Officials Material Weakness Material Noncompliance 2019-032 Controls Should Be Strengthened to Ensure Compliance with Allowable Cost Requirements of the TANF Program. CFDA Number 93.558 Temporary Assistance for Needy Families State Programs Federal Award No. G1701MSTANF 2017 G1801MSTANF 2018 G1901MSTANF 2019 Federal Agency U.S. Department of Health and Human Services Questioned Costs $2,374,752 Mississippi Department of Human Services April 22, 2020 75 P a g e Criteria Per the Code of Federal Regulations (2 cfr 200.437(a)-(b)), “(a) Costs incurred in accordance with the non-Federal entity’s documented policies for the improvement of working conditions, employer-employee relations, employee health, and employee performance are allowable. (b) Such costs will be equitably apportioned to all activities of the non-Federal entity.” Per the Code of Federal Regulations (2 cfr 200.404), “A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: … (b) The restraints or requirements imposed by such factors as: sound business practices; arm's-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award…. (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government.” Per the Code of Federal Regulations (2 cfr 200.210), “A Federal award must include the following information: … Federal Award Performance Goals. The Federal awarding agency must include in the Federal award an indication of the timing and scope of expected performance by the non-Federal entity as related to the outcomes intended to be achieved by the program. In some instances, (e.g., discretionary research awards), this may be limited to the requirement to submit technical performance reports (to be evaluated in accordance with Federal awarding agency policy). Where appropriate, the Federal award may include specific performance goals, indicators, milestones, or expected outcomes (such as outputs, or services performed or public impacts of any of these) with an expected timeline for accomplishment. Reporting requirements must be clearly articulated such that, where appropriate, performance during the execution of the Federal award has a standard against which non-Federal entity performance can be measured. The Federal awarding agency may include program-specific requirements, as applicable. These requirements should be aligned with agency strategic goals, strategic objectives, or performance goals that are relevant to the program.” Additionally, the Code of Federal Regulations (2 cfr 200.62) States that a nonfederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: Mississippi Department of Human Services April 22, 2020 76 P a g e (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition During testwork performed for the Allowable Costs/Cost Principle requirements of the TANF program during fiscal year 2019, auditors noted the following exceptions:  One instance totaling $11,034 in which auditor determined that expenditures for hotel rooms were associated with a “Law of 16 Conference.” The Law of 16 Conference is a self-help course for employee morale; therefore, costs should have been equitably apportioned to all activities of the entity, and not solely the TANF program. All costs associated with the “Law of 16” conference hotel rooms are questioned;  Questioned costs of $388,145 relating to known expenditures made for “Law of 16” conferences held by MDHS for MDHS personnel. “Law of 16” conferences were held by Priceless Ventures, LLC. Priceless Ventures had a contract with MCEC and FRC, subgrantees of MDHS, to supply these services. The contract states that it is Priceless Ventures’ responsibility to pay for all costs associated with the conferences with the contracted sum. As those contracts with MCEC and FRC were paid with TANF grant money, MDHS was effectively charging the same expense against the TANF grant twice. Additionally, things like entertainment and branded items are against allowable cost regulations. Therefore, all costs associated with the for “Law of 16” conferences are questioned;  Questioned cost of $1,927,573 relating to known expenditures made for Heart of David (HOD). The HOD grant lacked any discernable performance metrics and had an inadequate scope of services. HOD also represented itself as a faithbased organization; however, no certifications existed to certify the faith-based restriction of conducting inherently religious activities with federal monies. Additionally, entering into a subgrant agreement with HOD created a conflict of interest due to the personal relationship between an officer of HOD and the prior Executive Director JD of MDHS. See Finding 2019-030 for more information.  Questioned cost of $48,000 for payments made to Restore2/Recover2. These payments were made for opioid training that was allegedly never conducted. Executive Director JD and the principal of Restore2 (BD) conspired to fraudulently create invoices, sign in sheets, etc. to justify payment of expenses when BD was out of state in a luxury rehabilitation facility. See Finding 2019030 for more information.   Total questioned costs - $2,374,752 Mississippi Department of Human Services April 22, 2020 77 P a g e Cause Staff were either unaware or did not follow policies and procedures related to Activities Allowed and Allowable Costs of TANF funds. The former Executive Director JD circumvented controls and disregarded policies and procedures related to activities allowable and allowable costs in relation to expenditures made for Mississippi Community Education Center, Family Resource Center of Northeast Mississippi, Law of 16, Heart of David, and Restore2, LLC. Effect Failure to verify expenditures are allowable, appropriately pay expenditures out of federal or private funds, and allocate costs correctly can lead to federal funding being withdrawn or expenditures being paid with incorrect funds. This can also lead to fraud, waste, and abuse within an agency. Recommendation We recommend the Mississippi Department of Human Services strengthen control procedures in order to properly verify expenditures are allowable and appropriate. We also recommend that the agency appropriately pay expenditures out of the correct federal or private funds and allocate the funds correctly across all expenditures. Repeat Finding No. Statistically Valid The sample is considered statistically valid. View of Responsible Officials Material Weakness Material Noncompliance 2019-033 Controls Should Be Strengthened to Ensure Compliance with Allowable Cost Requirements of the CCDF Cluster. CFDA Number 93.575 Child Care and Development Block Grant 93.596 Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Award 1701MSCCDF 2017 1801MSCCDF 2018 1901MSCCDD 2019 Federal Agency U.S. Department of Health and Human Services Questioned Costs $3,532,466 Criteria The Code of Federal Regulations (45 cfr 98) regulates expenditures of funds under the Child Care and Development Block Grant (CCDF), including the identification of allowable costs for CCDF expended through the child care certificate program. The Mississippi Department of Human Services’ Division of Early Childhood Care and Development (DECCD) has published the Mississippi Child Care Payment Program Policy Manual, based on the CCDF State Plan, which incorporates applicable federal regulations and establishes allowable costs for Mississippi Department of Human Services April 22, 2020 78 P a g e child care certificate payments under the CCDF program. Specifically, Section 103.02 of this manual addresses co-payment fees and Section 104.04 addresses child care certificate rates. Therefore, eligible school-aged children should be issued certificates that state both full-time and part-time rates eligibility so that the provider can record the proper attendance each day (full-time when school is not in session or part-time when school is in session). Per the MDHS Subgrant/Agreement Manual, which subgrantees must attest to have read and understood prior to receiving grant awards, states in Section 5, “The accounting system of each MDHS subgrantee shall provide the monitors/auditors with adequate documentation to support the subgrantee’s financial claims. Source documents are required to support transactions entered into the subgrantee’s record keeping system. The following is a list of the minimum documentation required for selected transaction types: …Time sheets and activity reports which reflect the actual hours worked and duties performed. Time distribution/activity sheets are required when the employee’s time is charged to more than one subgrant or activity. An approved travel voucher showing that all travel expenses were incurred for the benefit of the subgrant; copies of supporting bills including out of state meal receipts, hotel bills, conference registration fee receipts, and conference agendas.” Per the Code of Federal Regulations (2 cfr 200.431), pension plan costs which are incurred in accordance with the established policies of the non-Federal entity are allowable, provided that: (1) Such policies meet the test of reasonableness. Per the Code of Federal Regulations (2 cfr 200.404), a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award… Per the Code of Federal Regulations (2 cfr 200.405), a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award… Additionally, the Code of Federal Regulations (2 CFR 200.62) states that a nonFederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: Mississippi Department of Human Services April 22, 2020 79 P a g e (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition In performing allowable cost testwork related to certificate rates and co-pays during fiscal year 2019, auditor noted the following:  Seven instances out of 120 tested, or 5.8 percent, in which school-aged children were issued a child care certificate that provided both full-time and part-time attendance rates, but the provider recorded, and was paid, only fulltime rates during months school was in session. These seven instances resulted in known questioned costs of $1,981 out of total fiscal year school-aged certificate payments of $24,462,523 and projected questioned costs of $751,243;  One instance out of 120 tested, or 1.2 percent, in which the family was deemed ineligible due to income being higher than 85 percent of average income for the state. This resulted in a questioned cost of $570 out of total certificate payments of $86,239,928 and projected questioned costs of $283,363; and  Seventeen instances in which allowability of activities or cost could not be determined. The total of the questioned costs amounts to $3,529,915. Auditor noted during the review of the subecipients MCEC and FRC, that the subrecipients comingled federal and private funds, as well as did not have a proper cost allocation system. Due to these issues, auditor could not determine if the costs associated with these sub-recipients were allocable to the CCDF program or reasonable. This resulted in known questioned cost of $3,532,466. As referenced in Finding 2019-030, the entire amount of CCDF grant funds paid to MCEC is questioned. The questioned costs for this finding were deducted from that total to ensure that the same costs were not questioned twice. Cause Staff were either unware or did not follow identified policies and procedures over allowable cost requirements. Effect Failure of DECCD to properly provide for the payment of part-time rates on the certificates for school-aged children, ensure child care certificates are active prior to payment, ensure the proper rate is used based on the age of the child, and to prevent duplicate child care certificates can result in improper payments to child care providers, questioned costs and the possible recoupment of funds by the federal granting agency. Recommendation We recommend the Mississippi Department of Human Services' Division of Early Childhood Care and Development ensure compliance with the allowable costs requirements of the Child Care and Development Block Grant by strengthening Mississippi Department of Human Services April 22, 2020 80 P a g e control procedures to ensure child care certificate rates and co-pays are assigned and providers paid in accordance with the requirements set forth in the Code of Federal Regulations and the Mississippi Child Care Payment Program Policy Manual. Repeat Finding Yes; 2018-049 in 2018; OTH-03 in 2017 Statistically Valid The sample is considered statistically valid. View of Responsible Officials Significant Deficiency Immaterial Noncompliance 2019-034 Strengthen Controls Over Review of Computations and Data for Allowable Cost Activity Used in the Manual Cost Allocation Process and Review of Indirect Costs Allocated to Federal Programs. CFDA Number 10.551 Supplemental Nutrition Assistance Program 93.558 Temporary Assistance for Needy Families State Programs 93.658 Title IV-E Foster Care Federal Award 12-35-2841 – 19 G1602MSTANF G1701MSTANF G1801MSTANF G1901MSTANF G1801MSFOST G1901MSFOST Federal Agency United States Department of Agriculture; U.S. Department of Health and Human Services Questioned Costs $1,871 Criteria The Internal Control - Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) specifies that a satisfactory control environment is only effective when there are adequate control activities in place. Good internal controls provide that the agency’s statistical units are used in accordance with the approved Cost Allocation Plans and that the agency is updating statistical information used for cost allocation on a quarterly basis, and that a supervisory review/approval of charges are in place. Additionally, the Code of Federal Regulations (2 cfr 200.62) states that a nonFederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; Mississippi Department of Human Services April 22, 2020 81 P a g e (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition During testwork performed over allowable activities and allowable cost requirements, auditor noted:  Three instances in which the reporting category charged on the manual cost allocation spreadsheet did not tie back to a reporting category listed on the crosswalk;  One instance totaling $831 where the auditor noted a charge was for parking fees related to “Law of 16” conference. Auditors determined through the audit process that expenditures for “Law of 16” conferences are questionable. Based on this, auditor will question any indirect expenditures related to “Law of 16” conferences; and  One instance in which the auditor could not verify proper approval for expenditures $1,040. Cause Keying error made while entering reporting categories into manual spreadsheet and staff oversight of review and approval of expenditures. Also, staff responsible for the review and payment of expenditures were possibly unaware of the questionable nature of expenditures relating to “Law of 16”. Effect Failure to implement proper control could result in over/under allocation funds as well as the allocation of funds to prohibited expenditures. Recommendation We recommend the Mississippi Department of Human Services strengthen controls over the review of computations and data used in the cost allocation process to ensure accurate distribution of costs to federal programs as well as strengthen controls over the review and approval of expenditures. Repeat Finding No. Statistically Valid The sample is considered statistically valid. View of Responsible Officials _____________________________________________________________________________________ CASH MANAGEMENT Mississippi Department of Human Services April 22, 2020 82 P a g e Material Weakness Material Noncompliance 2019-035 Controls Should Be Strengthened to Ensure Compliance with Cash Management Requirements of the TANF program. CFDA Number 93.558 Temporary Assistance for Needy Families State Programs Federal Award No. G1701MSTANF 2017 G1801MSTANF 2018 G1901MSTANF 2019 Federal Agency U.S. Department of Health and Human Services Questioned Costs None. Criteria The Code of Federal Regulations (2 cfr 200.514(C)(4)) states, “When internal control over some or all of the compliance requirements for a major program are likely to be ineffective in preventing or detecting noncompliance, the planning and performing of testing described in paragraph (c)(3) of this section are not required for those compliance requirements. However, the auditor must report a significant deficiency or material weakness in accordance with § 200.516 Audit findings, assess the related control risk at the maximum, and consider whether additional compliance tests are required because of ineffective internal control.” Additionally, the Code of Federal Regulations (2 cfr 200.305(b)) states that payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity. Advance payments are allowed provided the nonFederal entity maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. Reimbursement is the preferred method when these advance payment requirements cannot be met. Furthermore, the Code of Federal Regulations (2 cfr 200.62), states that a nonFederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and Mississippi Department of Human Services April 22, 2020 83 P a g e (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition During the audit of the Mississippi Department of Human Services (MDHS) subrecipients MCEC and FRC, auditor noted:  Subrecipients MCEC and FRC were advanced large sums of monies at the beginning of each grant period. MDHS informed auditors in meetings held on October 1, 2019 and February 5, 2020 that that they were not able to get sufficient information from MCEC or FRC throughout the grant period. Considering this failure to receive information, and overall lack of controls in regards to the activities allowed and allowable cost provisions of the federal grant, MDHS should have evaluated the appropriateness of large cash advances to the two subrecipients. A review of the underlying accounting records at MCEC and FRC indicated that both subrecipients requested advance payments before expenditures had been encumbered; thereby building large cash reserves to fund other grants and private operations. Both entities are funded by primarily federal grants. MCEC maintained an average monthly cash balance of approximately $4 million in FY 2017, $4.5 million in FY 2018, and $5 million in FY 2019. FRC maintained an average monthly cash balance of approximately $2 million in FY 2017, $2 million in FY 2018, and $2.5 million in FY 2019. These cash management practices are in direct violation of federal regulations and the Cash Management Improvement Act entered into between the State of Mississippi and the federal government. Cause Staff were either unaware or did not follow identified policies and procedures for areas that impact the cash management requirements related to Uniform Guidance. Effect Failure to verify expenditures are allowable, appropriately pay expenditures out of federal or private funds, and allocate costs correctly can lead to federal funding being withdrawn or expenditures being paid with incorrect funds. This can also lead to fraud, waste, and abuse within an agency. Recommendation We recommend the Mississippi Department of Human Services strengthen controls in order ensure federal funds are drawn down in accordance with the Cash Management Information Act and are designed to minimize the time elapsing Mississippi Department of Human Services April 22, 2020 84 P a g e between the transfer of funds from the United States Treasury and to the disbursement of funds. Repeat Finding No. Statistically Valid No. View of Responsible Officials _____________________________________________________________________________________ ELIGIBILITY Significant Deficiency Immaterial Noncompliance 2019-036 Controls Should Be Strengthened to Ensure Compliance with Eligibility and Benefit Payment Requirements of the CCDF Cluster. CFDA Number 93.575 - Child Care and Development Block Grant 93.596 - Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Award 1701MSCCDF 2017 1801MSCCDF 2018 1901MSCCDD 2019 Federal Agency U.S. Department of Health and Human Services Questioned Costs $2,030 Criteria The Code of Federal Regulations (45 cfr Part 98.20) sets forth the eligibility requirements for a child to receive child care services. The Code of Federal Regulations (45 cfr Part 98.50) further states how the Child Care and Development Block Grant (CCDF) funds should be expended for issuance of child care certificates. The Mississippi Department of Human Services’ Division of Early Childhood Care and Development (DECCD) has published the Mississippi Child Care Payment Program Policy Manual, based on the CCDF State Plan, which incorporates applicable federal regulations and establishes eligibility criteria to receive child care certificate payments under the CCDF program. Specifically, Chapter 1 of this manual addresses family and child eligibility requirements, including the requirement that an eligible child be less than 13 years of age, or 18 if the eligible child has special needs. Additionally, the Code of Federal Regulations (2 cfr 200.62), states that a nonFederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and Mississippi Department of Human Services April 22, 2020 85 P a g e (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition Based on eligibility testwork in regards to the CCDF program, out of 120 child care certificate payments made during fiscal year 2019, auditor noted the following exceptions:  Five instances in which the certificate file did not contain a certified and complete Child Care Payment Program application or redetermination form as applicable for certificate tested;  Five instances in which it could not be verified that the child either resides with a parent who is receiving TANF, working, or attending a jobtraining/education program or is a FC/PS/HHM referral due to lack of sufficient supporting documentation;  Five instances in which it could not be verified that the child resides with a family whose income does not exceed 85 percent of the State median income level due to lack of sufficient supporting documentation;  14 instances in which certificate copay amounts could either not be verified due to lack of sufficient supporting documentation or were incorrectly computed; and  One instance of ineligibility due to incorrect amount of income being entered into CCPS. This resulted in known questioned costs of $2,030 and a projected questioned cost of $78,967. Cause Staff were either unaware or did not follow identified policies and procedures for CCDF eligibility determinations. Effect Failure to ensure a child care certificate applications are complete and accurate could result improper payments to a child care provider representing questioned costs and the possible recoupment of funds by the federal granting agency. Recommendation We recommend the Mississippi Department of Human Services’ Division of Early Childhood Care and Development ensure compliance with the eligibility costs requirements of the Child Care and Development Block Grant. We also recommend strengthening control procedures to ensure child care certificate rates and copays are assigned in accordance with rules and regulations. Mississippi Department of Human Services April 22, 2020 86 P a g e Repeat Finding Yes – 2018-048 in 2018; 2017-035 in 2017; 2016-025 in 2016; 2015-002 in 2015; 2014-010 in 2014. Statistically Valid The sample is considered statistically valid. View of Responsible Officials _____________________________________________________________________________________ MATCHING, LEVEL OF EFFORT, EARMARKING Significant Deficiency Immaterial Noncompliance 2019-037 Controls Should Be Strengthened to Ensure Compliance with Matching Requirements of the CCDF Cluster. CFDA Number 93.575 Child Care and Development Block Grant 93.596 Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Award 1601MSCCDF 2016 1701MSCCDF 2017 1801MSCCDF 2018 1901MSCCDD 2019 Federal Agency U.S. Department of Health and Human Services Questioned Costs None. Criteria Per the Code of Federal Regulations (2 cfr 200 Appendix XI, Compliance Supplement), In-Kind contributions should be valued in accordance with 2 cfr sections 200.306, 200.434 and 200.414 along with the terms and conditions of the award. Additionally, the Code of Federal Regulations (2 cfr 200.62), states that a nonFederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and Mississippi Department of Human Services April 22, 2020 87 P a g e (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition Based on matching testwork for the CCDF program, auditors noted that the MDHS was not able to provide monthly reporting worksheets of in-kind donations. Additionally, MDHS does not require subrecipients to attach supporting documentation for in-kind expenditures. Due to the lack of supporting documentation, the auditor was unable to verify the values placed of those in-kind contributions are in accordance with Uniform Grant Guidance. Cause The Mississippi Department of Human Services does not require sub-recipients to submit supporting documentation for in-kind contributions. Effect Failure to require sub-recipients to submit supporting documentation regarding their claims for in-kind contributions could result in the improper valuation of inkind contributions, inaccurate reporting of those in-kind contributions on the quarterly AFC-696 reports, and improper matching of federal funds. Recommendation We recommend the Mississippi Department of Human Services require subrecipients to provide supporting documentation, such as a listing of contributions and the method of the valuation of those contributions, for in-kind contributions claimed by the Mississippi Department of Human Services on its quarterly AFC-696 reports. Repeat Finding No. Statistically Valid The sample is considered statistically valid. View of Responsible Officials _____________________________________________________________________________________ PERIOD OF PERFORMANCE Significant Deficiency Immaterial Noncompliance 2019-038 Controls Should Be Strengthened to Ensure Compliance with the Period of Performance for the CCDF Program. CFDA Number 93.575 - Child Care and Development Block Grant 93.596 - Child Care Mandatory and Matching Funds of the Child Care and Development Fund Federal Award 1701MSCCDF 2017 1801MSCCDF 2018 1901MSCCDD 2019 Federal Agency U.S. Department of Health and Human Services Mississippi Department of Human Services April 22, 2020 88 P a g e Questioned Costs $46,264 Criteria The Code of Federal Regulations (45 cfr 98.60), requires both the Federal and nonFederal share of the Matching Fund shall be obligated in the fiscal year in which the funds are granted and liquidated no later than the end of the succeeding fiscal year. The Code of Federal Regulations (2 cfr 200.62), states that a non-Federal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition During testwork performed over Period of Performance requirements, auditor noted two instances in which the liquidation of funds totaling $46,264 did not occur within the Period of Performance of the federal grants. Cause Subrecipient close-out reports were not submitted timely. Effect Expenditures were made to a federal award/grant beyond the period of performance, resulting in questioned costs. Recommendation We recommend the Mississippi Department of Human Services strengthen controls over the grant close-out process to ensure liquidations are performed during the grant period. Repeat Finding No. Statistically Valid The sample is considered statistically valid. View of Responsible Officials _____________________________________________________________________________________ PROCUREMENT, SUSPENSION, AND DEBARMENT Material Weakness Material Noncompliance Mississippi Department of Human Services April 22, 2020 89 P a g e 2019-039 Strengthen Controls Over Procurement Policies and Awarding Subgrants for the TANF program. CFDA Number 93.558 Temporary Assistance for Needy Families State Programs Federal Award No. G1901MSTANF 2019 Federal Agency U.S. Department of Health and Human Services Questioned Costs $72,000 Criteria Per the Code of Federal Regulations (45 cfr 200.331(b)), all pass-through entities must: … Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward… Per the Code of Federal Regulations (45 cfr 200.319(a)), All procurement transactions must be conducted in a manner providing full and open competition consistent with the standards of this section. In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, or invitations for bids or requests for proposals must be excluded from competing for such procurements. Some of the situations considered to be restrictive of competition include but are not limited to: … (5) Organizational conflicts of interest. Per the Code of Federal Regulations (45 cfr 200.320(b)), procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.” Additionally, per Chapter 3 Section 205.02 of the State of Mississippi Procurement Manual that was in effect during the time period these contracts were awarded, “Insofar as it is practical for small purchases of services greater than $50,000 and not exceeding $75,000, no less than three (3) sources shall be solicited to submit written responses that are recorded and placed in the procurement file… If this method is used, award shall be made to the vendor offering the lowest and best bid or proposal. In the event three written responses are not obtained, the agency shall include a memo to the procurement file explaining why this was not accomplished. Per the Code of Federal Regulations (45 cfr 200.404), a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: …(b) The restraints or requirements imposed by such factors as: sound business practices; arm's-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. Mississippi Department of Human Services April 22, 2020 90 P a g e Additionally, per the Code of Federal Regulations (45 cfr 200.62), states that a non-Federal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition During testwork performed for the Procurement, Suspension, and Debarment requirements of the TANF program during fiscal year 2019, auditor noted the following: For Procurement, Suspension and Debarment relating to subawards:  Through discussions with MDHS upper management, auditor became aware of the prior Executive Director JD’s direct involvement in the TANF subaward process. Executive Director JD, at his sole discretion, awarded subrecipients without following any type of competitive RFP process. Policies in place at the time these awards were granted stated that a scoring process would be utilized to ensure fair and equitable awards were distributed. The policies were disregarded.  Agency did not perform risk assessments of subawards as noted in Finding 2019-030. Due to this failure to perform risk assessments, MDHS did not have any objective basis to evaluate the performance of subrecipients from prior grant years to ensure compliance with federal regulations. For Procurement, Suspension and Debarment relating to Contractual Services:  Two instances in which auditor noted the agreement was not secured in a manner that provided full and open competition. Throughout the audit process, the auditor determined that MDHS entered into agreements with contractors that had personal relationships with the former Executive Director, and/or did not engage in proper procurement processes (refer to Finding 2019-030). Based on this information, any costs associated with these contracts would be unreasonable. See details regarding two instances below: o Auditor noted a personal relationship between the former Executive Director JD and the president of NCC Ventures. Executive Director JD Mississippi Department of Human Services April 22, 2020 91 P a g e also hired an immediate family member of the president of NCC Ventures to work in MDHS’ Executive office during the contract period. Additionally, MDHS only sent out three invitations/solicitations to bid, and only NCC Ventures responded to the solicitation. The contract’s scope included “studying and measuring how well the public workforce system is meeting employer needs” and “engaging employers on behalf of MDHS client to assist in improving opportunity and outcomes in the workforce.” Federal procurement regulations require that a “reasonable number” of bids be evaluated. The remaining two businesses were not located in Mississippi and were not registered with the Mississippi Secretary of State’s Office. When auditors inquired of personnel at the other two businesses solicited as to why they did not respond to the solicitation, one informed auditor that his expertise was in construction management and had nothing to do with the project scope of workforce development. Total amount paid on the contract of $72,000 is questioned. o Auditor noted a personal relationship between prior Executive Director JD and an officer of Restore2, LLC (BD). BD was a former employee of MDHS. Contract for $48,000 was executed by Restore2 and MDHS for opioid training sessions. Based on information uncovered during an investigation of these payments due to fraud, waste, and abuse, auditors noted that work on this contract was not performed as stated in supporting documentation and that the purpose and need of the contract was fabricated by former Executive Director JD. Cause Staff were not aware or did not follow policies and procedures over the procurement of contractual services. Additionally, procurement procedures were not adequately performed in order to ensure open and free competition. Effect Failure to abide by procurement guidelines of both federal and state regulatory authorities could result in inappropriate contracts and payments, which could result in a clawback of federal monies. Additionally, disregarding policies and controls could lead to fraud, waste, and abuse. Recommendation We recommend the Mississippi Department of Human Services strengthen controls to ensure compliance with state and federal regulations over the procurement of contracts. Additionally, we recommend the Mississippi Department of Human Services establish updated grant award policies in regards to their responsibility as a federal grant pass through. Repeat Finding No. Statistically Valid The sample is considered statistically valid. View of Responsible Officials Mississippi Department of Human Services April 22, 2020 92 P a g e Significant Deficiency 2019-040 Controls Should Be Strengthened Over Procurement of Subrecipients for SNAP. CFDA Number 10.551 Supplemental Nutrition Assistance Program (SNAP) 10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Federal Award No. 2018 SNAP E&T 50% 2019 SNAP E&T 100% 2019 USDA Outreach 2019 TEFAP Federal Agency U.S. Department of Agriculture Questioned Costs None. Criteria Per the Code of Federal Regulations (45 cfr 200.331 (b)), all pass-through entities must: … Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward… The Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) specifies that a satisfactory control environment is only effective when there are adequate control activities in place. Effective control activities dictate agencies maintain written policies and procedures in maintaining a good control environment. Additionally, the Code of Federal Regulations (2 cfr 200.303(a)), states agencies should, “Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Without written policies and procedures, the auditor is unable to substantiate nonwritten policies. Furthermore, the Code of Federal Regulations (45 cfr 200.62) states that a nonFederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and Mississippi Department of Human Services April 22, 2020 93 P a g e (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition When performing testwork related to SNAP Procurement, Suspension, and Debarment, auditors noted the following:  Out of the eight items sampled, two were for Skills2Work partner assessments. Skills2Work is a workforce development project designed to leverage federal funds to help the State scale career and technical education programs so that they are more accessible to low-income families. Companies that want to become a partner in the program, and receive a reimbursement of up to 40 percent of the allowable program cost, must fill out an application, scope of services, budget narrative and estimate and apply at MDHS. MDHS stated that all Skills2Work industry “partners” are required to receive a partner assessment. These assessments are used to evaluate the partner’s viability based on the program criteria and the ability to service those individuals who qualify for SNAP benefits. MDHS supplied auditors with a copy of the partner assessment template, but was unable to provide auditors with the actual assessments used to evaluate the partners for admission to the program. Auditors inquired if there were any written policies and procedures for the partner assessments, and were provided an additional copy of the partner assessment template and the Subgrantee Manual used for all MDHS subgrants. Auditors were able to find a brochure sent to partners about the program, and a toolkit template on the MDHS website, but no other information was provided by MDHS. Auditor determined that all policies were verbal, and that there were not adequate controls over the partnership assessments.  Out of eight items sampled, one contract was for MCEC and one contract was for FRC. Due to the direct involvement of former Executive Director JD, auditor not verify these contracts were entered into using arms-length bargaining.  Out of eight items sampled, MDHS did not provide any supporting documentation for the procurement of the remaining four contracts; therefore, auditor cannot ascertain whether procurement is valid. Cause Inadequate procedures and a failure to follow other established policies by MDHS personnel. Policies for Skills2Work were verbal directives only, causing inconsistencies among staff. Effect Without proper policies, procedures, and documentation to support costs, ineligible participants could be admitted to the Skills2Work program; thereby, causing an unallowable cost. Recommendation We recommend Mississippi Department of Human Services strengthen the controls and prepare written policies and procedures over the procurement process of the Skills2Work program. Mississippi Department of Human Services April 22, 2020 94 P a g e Repeat Finding No. Statistically Valid The sample is considered statistically valid. View of Responsible Officials _____________________________________________________________________________________ REPORTING Significant Deficiency 2019-041 Controls Should Be Strengthened over the Submission of Required Federal Reports for the TANF Program. CFDA Number 93.558 Temporary Assistance for Needy Families State Programs Federal Award No. G1701MSTANF 2017 G1801MSTANF 2018 G1801MSTANF 2019 Federal Agency U.S. Department of Health and Human Services Questioned Costs None. Criteria The Code of Federal Regulations (45 cfr 265.3), requires a “TANF Data Report” (ACF-199) for the Temporary Assistance to Needy Families (TANF) program to be completed and submitted in accordance with instructions provided by the Administration for Children and Families (ACF). Those instructions require States to submit quarterly reports for each open fiscal year of grant funds until all funds are expended; therefore, States will likely submit separate forms for multiple grant award years simultaneously. These reports are due and must be submitted 45 days after the end of each quarter. Additionally, the Code of Federal Regulations (45 cfr 200.62), states that a nonFederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and Mississippi Department of Human Services April 22, 2020 95 P a g e (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition During testwork performed for TANF reporting for FY 2019, auditor noted the following:  Data required to be submitted for the T-199 report, QE December 31, 2018 was not submitted within 45 days after the end of the reporting period. Data was submitted 144 days late; and  Data required to be submitted for the T-199 report, QE June 30, 2019 was not submitted within 45 days after the end of the reporting period. Data was submitted 6 days late. Cause Staff were either unaware or did not follow policies and procedures related to federal reporting requirements. Effect Failure to timely review and submit reports could result in reporting penalties and could impact funding determinations. Recommendation We recommend Mississippi Department of Human Services strengthen the controls over the preparation, review and timely submission of required performance and financial reports prior to submission to the Department of Health and Human Services. Repeat Finding No. Statistically Valid The sample is considered statistically valid. View of Responsible Officials _____________________________________________________________________________________ SUBRECIPIENT MONITORING Material Weakness Material Noncompliance 2019-042 Controls Should Be Strengthened over On-Site Monitoring for the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), Child Care and Development Block Grant (CCDF), Low Income Home Energy Assistance Program (LIHEAP), and Social Services Block Grant (SSBG) Programs. CFDA Number 10.551 93.558 93.667 93.575 Supplemental Nutrition Assistance Program Temporary Assistance for Needy Families State Programs Social Services Block Grant Child Care and Development Block Grant Mississippi Department of Human Services April 22, 2020 96 P a g e 93.596 Child Care Mandatory and Matching Funds of the Child Care and Development Fund 93.568 Low Income Home Energy Assistance Program Federal Award No. G1701MSTANF 2017 G1801MSTANF 2018 G1801MSCCDF 2018 SNAP – Letter of Credit G1801MSSOSR 2018 G18B1MSLIEA 2018 Federal Agency United States Department of Agriculture, U.S. Department of Health and Human Services Questioned Costs None. Criteria The terms and conditions of the grant agreements between the Mississippi Department of Human Services (MDHS) and the U.S. Department of Health and Human Services require MDHS to administer grants in compliance with the Code of Federal Regulations (2 cfr 200). The Code of Federal Regulations (2 cfr 200.331) requires MDHS to properly identify subaward requirements to subrecipients, evaluate the risk of noncompliance for each subrecipient, and monitor the activities of subrecipients as necessary to ensure that subawards are used for authorized purposes, complies with the terms and conditions of the subawards and achieves performance goals. We evaluated MDHS’s compliance with subrecipient monitoring requirements based on written policies and procedures designed by MDHS’s Division of Program Integrity – Office of Monitoring (OM) to satisfy during-the-award monitoring requirements. OM procedures require an on-site monitoring review of each subgrantee contract at least once during the subgrant period. A tracking mechanism is used to ensure all subgrantee contracts are properly identified and monitored. Monitoring tools/checklists are used during each on-site monitoring review to provide guidance and to document a review was performed. The on-site monitoring workpapers are reviewed and approved by OM supervisory personnel prior to issuance of a written report, the Initial Report of Findings & Recommendations, which is used for communicating finding(s) and/or questioned costs to subgrantees. The written report should be issued within 30 working days from the date of the exit conference, which is normally held on the last day of the on-site review. The Code of Federal Regulations (2 cfr 200.328(a)), states the non-Federal entity is responsible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring by the non-Federal entity must cover each program, function or activity. See also § 200.331 Requirements for passthrough entities. The Code of Federal Regulations (2 cfr 200.328(b)(2)), states the non-Federal entity must submit performance reports using OMB-approved government-wide standard information collections when providing performance information. As appropriate in accordance with above mentioned information collections, these Mississippi Department of Human Services April 22, 2020 97 P a g e reports will contain, for each Federal award, brief information on the following unless other collections are approved by OMB: (i) A comparison of actual accomplishments to the objectives of the Federal award established for the period. Where the accomplishments of the Federal award can be quantified, a computation of the cost (for example, related to units of accomplishment) may be required if that information will be useful. Where performance trend data and analysis would be informative to the Federal awarding agency program, the Federal awarding agency should include this as a performance reporting requirement. (ii) The reasons why established goals were not met, if appropriate. (iii) Additional pertinent information including, when appropriate, analysis and explanation of cost overruns or high unit costs. The Code of Federal Regulations (2 cfr 200.331(6)(b)), states: Evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate Subrecipient monitoring described in paragraph (e) of this section. Additionally, the Code of Federal Regulations (45 cfr 200.62), states that a nonFederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Furthermore, The Internal Control – Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Manual specifies that a satisfactory control environment is only effective when there are adequate control activities in place. Condition During testwork performed on subrecipient on-site monitoring for 84 subgrant contracts during state fiscal year 2019, auditor noted the following exceptions:  During conversations with upper management of MDHS, auditor noted that prior Executive Director JD would circumvent controls of the monitoring process for certain subrecipients. Monitoring visits were called short and monitors were recalled to MDHS and reassigned if issues were found during monitor visits. This direct involvement of the former Executive Director and the disregard of controls resulted in a lack of integrity in the monitoring process. Monitoring reports could not be relied upon during testwork as Mississippi Department of Human Services April 22, 2020 98 P a g e auditors could not determine what, if any, appropriate monitoring actually occurred for subgrants. No other staff at MDHS reported to the Mississippi Office of the State Auditor that monitors were being recalled and controls were being circumvented by Executive Director JD. Additionally, testwork determined widespread fraud, waste, and abuse at two of the largest subrecipients of TANF funds. Monitoring reports for prior year grants did not indicate any questioned costs at these subrecipients, regardless of the subrecipients repeatedly participating in unallowable activities. Auditors noted substantial violations of the Subgrant Manual by both MCEC and FRC in regards to asset purchases, indirect costs, allowable costs, etc. These violations and the fraud, waste, and abuse uncovered during the audit verify that subrecipients were not properly monitored.  Seven contracts, or 8 percent, in which corrective actions were not received from the subrecipient within 15 working days from the date the report was issued, or auditor could not verify corrective actions were received timely due to lack of audit trail. o Corrective Actions for one contract were received 21 days from the Initial Monitoring Report (IMR), o For six contracts, auditor could not verify corrective actions were necessary, or received timely, due to lack of audit trail;  Eleven contracts, or 13 percent, in which the IMR was not issued within 60 working days from the date of the exit conference, or auditor could not determine when it was issued due to lack of audit trail. o IMRs were issued between 66 and 261 days late, with an average of 124 working days after the exit conference took place;  Six contracts, or 7 percent, in which the IMR was not included in monitoring file; therefore, supervisory approval prior to issuance of the report to the subrecipient could not be verified;  Six contracts, or 7 percent, in which we were unable to determine if questioned costs had been completely resolved as of the date of testwork;  Six contracts, or 7 percent, in which the auditor could not verify monitoring took place during the contract period due to lack of documentation in monitoring file;  Twenty-five (25) contracts, or 30 percent, in which the Monitoring Supervisor Checklist was dated after the IMR letter, or was not included in the file, therefore Monitoring Supervisor Review Checklist approval prior to issuance of the IMR letter could not be verified;  Five contracts, or 6 percent, in which the On-Site Monitoring review of the Subrecipient was not performed during the subgrant period;  Three contracts, or 3 percent, in which the Subgrants were not monitored in federal FY 2018; and Mississippi Department of Human Services April 22, 2020 99 P a g e In addition, the MDHS Office of Monitoring (OM) did not evaluate the risk of noncompliance of its subrecipients in order to perform monitoring procedures based upon identified risks, as is a requirement of Uniform Guidance. Cause Staff were either unaware or did not follow identified policies and procedures for monitoring requirement. Additionally, per documentation obtained by auditors, former Executive Director JD colluded with MDHS personnel to undermine the monitoring of subrecipients and circumvented controls in order to delay or stop monitoring of certain subrecipients. Effect MDHS programmatic funding divisions rely upon OM monitoring procedures to verify compliance with program regulations and to identify potential problem areas needing corrective action. Failure to properly monitor subreceipients in a timely manner could allow noncompliance with federal regulations to occur and go undetected, potentially resulting in questioned costs. Recommendation We recommend the Mississippi Department of Human Services’ Division of Program Integrity – Office of Monitoring (OM) strengthen controls over subrecipient monitoring. OM should evaluate the risk of noncompliance of each subrecipient and perform monitoring procedures based upon identified risks. We also recommend the agency ensure subawards are monitored timely and that the “Report of Findings & Recommendations” prepared as a result of the on-site monitoring be issued in a timely manner to enable immediate corrective action procedures to be initiated. We further recommend that the agency maintain all supporting monitoring tools, reports, and correspondence in the monitoring file. Repeat Finding Yes – 2018-046 in 2018; 2017-037 in 2017; 2016-027 in 2016; 2015-005 in 2015; 2014-017 in 2014; 2013-015 in 2013. Statistically Valid The sample is considered statistically valid. View of Responsible Officials Material Weakness Material Noncompliance 2019-043 Strengthen Controls Over Subrecipient Monitoring to Ensure Compliance with OMB Uniform Guidance Auditing Requirements. CFDA Number 10.551 Supplemental Nutrition Assistance Program 93.558 Temporary Assistance for Needy Families State Programs 93.575 Child Care and Development Block Grant 93.596 Child Care Mandatory and Matching Funds of the Child Care and Development Fund 93.667 Social Services Block Grant 93.568 Low Income Home Energy Assistance Program Federal Award No. G1801MSTANF 2018 G1801MSSOSR 2018 Mississippi Department of Human Services April 22, 2020 100 P a g e G1701MSCCDF 2017 G1801MSCCDF 2018 SNAP – Letter of Credit G17B1MSLIEA 2017 G18B1MSLIEA 2018 Federal Agency U.S. Department of Agriculture, U.S. Department of Health and Human Services Questioned Costs None Criteria The Office of Management and Budget (OMB) Uniform Guidance states the pass-through entity is responsible for (1) ensuring that subrecipients expending $750,000 or more in Federal awards during their fiscal year have met the audit requirements of OMB Uniform Guidance and that the required audits are completed within nine months of the end of the subrecipient’s audit period; (2) issuing a management decision on findings within 6 months after receipt of the subrecipient’s audit report; and (3) ensuring that the subrecipient takes timely and appropriate corrective action on all audit findings. In cases of continued inability or unwillingness of a subrecipient to have the required audits, the pass-through entity shall take appropriate action using sanctions. Additionally, the Code of Federal Regulations (45 cfr 200.62), states that a nonFederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition During the audit of the Mississippi Department of Human Services (MDHS), auditor reviewed the Division of Program Integrity – Office of Monitoring (OM) audit files and Monitoring Tracking Document for MDHS Subgrantees for state fiscal year 2017. During our review, we noted the following weaknesses:  Auditor noted the SFY 2017 Single Audit Tracking System utilized by the MDHS Office of Monitoring to track the status of OMB Uniform Guidance audits for DHS subrecipients does not include expenditures made by the subrecipient nor does it include all sub-recipients who received federal funds from MDHS during FY 2017. The audit requirements of the Code of Federal Regulations (2 cfr Part 200, subpart F) are based on expenditures of Federal awards; therefore, subrecipients of MDHS could have expended Federal awards in excess of amounts that require a single audit that may have not been Mississippi Department of Human Services April 22, 2020 101 P a g e included on MDHS’s tracking document. The agency was not able to provide an expenditure report to the auditors in order to ensure completeness of the monitoring files.  Three instances in which the Office of Monitoring could not provide an OMB monitoring file for the sub-recipient; therefore, auditor could not determine compliance with OMB monitoring procedures;  Nineteen (19) instances in which the Office of Monitoring failed to send out reminder letters within a timely manner. Reminder letters were mailed on February 6, 2019, on average 7.5 months after the due dates of audit reports; and  Eighteen (18) instances where the OMB Uniform Guidance audit report for the subgrantee was not received by Office of Monitoring within nine months of the subgrantee’s fiscal year end. Subgrantee audit reports were received on average 213 days after the nine-month deadline. Cause Staff were either unaware or did not follow identified policies and procedures for subrecipient monitoring related to Uniform Grant Guidance. Effect Failure to properly monitor subrecipients could allow noncompliance with federal regulations to occur and go undetected, potentially resulting in fraud, waste, and abuse within the agency. Recommendation We recommend the Mississippi Department of Human Services’ Division of Program Integrity – Office of Monitoring (OM) strengthen controls over subrecipient monitoring for OMB Uniform Guidance audits to ensure recipients expending $750,000 or more in Federal funds during their fiscal year are appropriately monitored and that the appropriate federal audit is obtained. We further recommend that OM design a monitoring tool based on expenditures incurred by subrecipients to ensure all subrecipients are included on the tracking report and continue to follow-up with subgrantees in a timely to ensure compliance with audit requirements. Repeat Finding Yes – 2018-047 in 2018; 2017-038 in 2017; 2016-028 in 2016; 2015-009 in 2015; 2014-016 in 2014. Statistically Valid The sample is considered statistically valid. View of Responsible Officials _____________________________________________________________________________________ SPECIAL TESTS AND PROVISIONS Significant Deficiency 2019-044 Controls Should Be Strengthened over the Review of Foster Care Maintenance Payment Rates and the Calculation of Foster Care Maintenance Payments. Mississippi Department of Human Services April 22, 2020 102 P a g e CFDA Number 93.658- Foster Care Title IV-E Federal Award No. G1801MSFOST 2018 G1901MSFOST 2019 Federal Agency U.S. Department of Health and Human Services Questioned Costs None. Criteria Internal Control – Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) specifies that a satisfactory control environment is only effective when there are adequate control activities in place. Effective control activities dictate that the agency perform a multi-level review of the rates being entered into Mississippi Automated Child Welfare System (MACWIS), as well as at least annual tests over MACWIS to ensure the system is properly calculating Foster Care Maintenance payments. Additionally, the Code of Federal Regulations (45 cfr 200.62), states that a nonFederal entity must have internal control over compliance designed to provide reasonable assurance that; (a) Transactions are properly recorded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal reports; (2) Maintain accountability over assets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Condition During testwork performed related to Foster Care Special Tests and Provisions, auditor noted that proper controls are not in place to ensure the accuracy of payment rates within the MACWIS system, nor are controls in place to ensure the accuracy of payment calculations. Cause Staff is unaware of the importance of an internal control structure. Effect Failure to implement proper internal controls could result in inaccurate payment rates and payment calculations. Recommendation We recommend the Mississippi Department of Human Services strengthen controls over the review of payment rates being entered into MACWIS, as well as perform tests over the accuracy of payment calculations within MACWIS. Repeat Finding No. Mississippi Department of Human Services April 22, 2020 103 P a g e Statistically Valid Sample is considered statistically valid. View of Responsible Officials OTHER AUDIT FINDING In planning and performing our audit of the federal awards received by the Mississippi Department of Human Services for the year ended June 30, 2019, we considered internal control over compliance with the requirements that could have a direct and material effect on the major federal programs. Matters which require the attention of management were noted. These matters which do not have a material effect on the agency’s ability to administer major federal programs in accordance with applicable laws, regulations, or provisions of contracts or grant agreements involve an immaterial instance of noncompliance and other internal control deficiencies. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. Finding and Recommendation ELIGIBILITY Control Deficiency OTH – 19-01 Controls Should Be Strengthened over Segregation of Duties and Granting Access to MAVERICS. CFDA Number 93.558 Temporary Assistance for Needy Families State Programs Federal Award G1901MSTANF 2019 Federal Agency U.S. Department of Health and Human Services Questioned Costs None. Criteria Good internal controls state that segregation of duties must be in place to help prevent and detect misappropriation of funds due to error or fraud. Because of the high percentage of employees with access to MAVERICS, it is necessary to maintain controls over who can both enter and approve benefits so that an unnecessary risk to MDHS does not exist. MAVERICS serves as the primary TANF computer interface for Eligibility determinations for the State of Mississippi. Under TANF Eligibility Determination Process in Chapter 7, Certification and Authorization, of the TANF policy published on the MDHS website, Authorization is an official act, usually performed by the county director or their designee, certifying as to the eligibility or continuing eligibility of any assistance payments Mississippi Department of Human Services April 22, 2020 104 P a g e group. The authorization requests the issuance of a TANF benefit and authorizes the expenditures of public tax funds. Additional criteria from the MDHS Management Information Systems (MIS) Division policy states that system administrators will conduct Self-Audits of all user accounts on a semi-annual basis, at a minimum. Condition During testwork performed on MAVERICS User Access during fiscal year 2019, we noted the following:  Of the 40 MAVERICS profiles examined, two instances were noted in which a RACF profile was active for a terminated employee; and  Of the 40 MAVERICS profiles examined, two instances where employees had been inactive for more than 90 days. Cause Agency does not effectively follow policy or procedures for deleting or amending MAVERICS user access. Effect Failure to strengthen controls over MAVERICS access could allow basic TANF benefits can be certified/approved by personnel not authorized to certify/approve a payment. Recommendation We recommend the Mississippi Department of Human Services strengthen controls over access to MAVERICS. Repeat Finding Yes; OTH-18-04 in 2018; OTH–17-04 in 2017 Statistically Valid No. View of Responsible Officials End of Report MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 BE IT REMEMBERED, That the Mississippi Board of Trustees of State Institutions of Higher Learning of the State of Mississippi met in a regular session at the Board Office in Jackson, Mississippi, at 9:00 a.m., and pursuant to notice in writing mailed by certified letter with return receipt requested on November 22, 2016, to each and every member of said Board, said date being at least five days prior to this October 19, 2017 meeting. At the above-named place there were present the following members to wit: Mr. Tom Duff, Dr. Ford Dye, Mr. Shane Hooper, Ms. Ann H. Lamar, Dr. Alfred E. McNair, Jr., Mr. Chip Morgan, Mr. Hal Parker, Mr. Alan Perry, Ms. Christine Pickering, Dr. Douglas Rouse, Mr. C.D. Smith and Dr. J. Walt Starr. The meeting was called to order by C.D. Smith, President. Trustee Chip Morgan introduced Dr. Al Rankins, President of Alcorn State University, to give the prayer. INTRODUCTION OF GUESTS • President C.D. Smith welcomed the Student Government Association Officers: Patrick Herbert, SGA President at Alcorn State University; Ashley Griffin, SGA President at Delta State University; Tyler McMurray, SGA President at Mississippi State University; Kamberlin King, SGA President at Mississippi Valley State University; Dion Kevin, SGA President of the University of Mississippi; Edgar Meyer, SGA President of the University of Mississippi Medical Center; Cameron Cloud, SGA President at the University of Southern Mississippi; and McKenna Stone, SGA Vice President at the University of Southern Mississippi. APPROVAL OF THE MINUTES On motion by Trustee Pickering, seconded by Trustee Perry, all Trustees legally present and participating voted unanimously to approve the Minutes of the Board meeting held on September 21, 2017. CONSENT AGENDAS On motion by Trustee Rouse, seconded by Trustee McNair, all Trustees legally present and participating voted unanimously to approve the following Consent Agendas. ACADEMIC AFFAIRS 1. SYSTEM – Approved the following new academic programs: a. ASU - Bachelor of Science in Athletic Training degree (CIP 51.0913) b. ASU – Master of Arts in History degree (CIP 54.0101) c. UM – Bachelor of Science in Economics degree (CIP 13.1401) d. UM – Master of Science in Hospitality Management degree (CIP 52.0910) e. UM – Master of Science in Integrated Marketing Communication degree (CIP 09.0900) f. UM – Master of Accountancy and Data Analytics degree (CIP 52.0399) g. UM – Master of Taxation and Data Analytics degree (CIP 52.1601) 2. SYSTEM – Approved the following new academic unit: UM – Center for Graphene Research and Innovation. 1 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 3. SYSTEM – Approved the following academic unit modification: UMMC – Rename the Biochemistry Department to the Department of Cell and Molecular Biology. 4. SYSTEM – Approved the following academic program modifications: a. UMMC – Rename the Master of Science in Population Health the Master of Science in Population Health Science. b. UMMC – Rename the Doctorate of Philosophy in Population Health the Doctorate of Philosophy in Population Health Science. c. UMMC – Rename the Doctorate of Philosophy in Biochemistry the Doctorate of Philosophy in Cell and Molecular Biology. d. MUW – Consolidate the Master of Education in Reading Literacy, the Master of Education in Gifted Studies, and the Master of Education in Education leadership degrees into the Master of Education in Education degree. (CIP 13.0101). FINANCE 5. MSU – Approved the request for the MSU Extension Agricultural Communications to enter into a five-year copier lease agreement with Canon Solutions America for IMAGEPRESS C8000VP Digital Press Set, Prisma Direct, and Prisma Prepare, with annual recurring maintenance and support plus training on the IMAGEPRESS C8000VP Digital Press Set, Prisma Direct, Prisma Prepare and Oce 115vp. MSU is also seeking approval from the Mississippi Department of Information Technology Services (IT related contract over $250,000) and the Public Procurement Review Board (state contract over $500,000). The contract will not be signed until approval is received from each of these bodies. This rental is needed in order to increase and better integrate production capabilities to meet current and expanding needs for printing to support Extension personnel, programs, and outreach to clientele. The C8000vp will replace two Oce 110 VeroPrint copiers that are reaching the end of their lease. Prisma Prepare will replace a current version that is reaching the end of its lease. Prisma Direct will manage printing equipment and Prisma Prepare software. The contract will begin when the documentation is approved and continue for 60 months. There will be a monthly charge of $7,507.51 paid upon receipt of invoice. There will be additional payments for professional services at a state contract rate of $200 per hour. The total cost is $485,450.60. In addition, MSU will pay “click” charges as set forth in the State Contract. It is unknown exactly how many copies will be made over the five-year contract but it is estimated that there will be additional charges of up to $306,000, giving a total anticipate expenditure of around $791,450.60. The total cost of this contract will be paid with Agricultural Communications Print Shop Service Center funds. The agreement, which was reviewed and approved by the IHL Associate Commissioner of Legal Affairs prior to the Board’s approval of this item, is on file in the Board Office. 6. MSU – Approved the request to enter into a contract with Diversified Elevator Service & Equipment Co., Inc. to continue daily operation and maintenance on the 135 elevators on MSU’s Starkville campus. The contract will run for five years starting January 1, 2018 and expiring on December 31, 2022. The contract amount is $25,655.00 per month or $1.6 million over 5 years. Funds are available from MSU General Funds. The agreement, which was reviewed and approved by the IHL Associate Commissioner of Legal Affairs prior to the Board’s approval of this item, is on file in the Board Office. 7. MSU – Approved the request to amend the contract between MSU’s Office of Nutrition Education (ONE) and Frontier Strategies, LLC, for the purposes of making a no additional cost technical 2 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 change in the contract between the production budget and the placement budget. The original agreement provides for the design, production and implementation of an advertising and communications plan with key messages targeting SNAP-Ed recipients in the State of Mississippi promoting healthy eating, shopping and cooking choices to increase awareness and encourage healthy lifestyles. The original contract term is July 6, 2017 to September 30, 2017. The term of Amendment #1 is October 1,2017 to September 30, 2018. The agreement may be renewed for a period of one (1) year upon agreement of both parties in writing. The total contract amount is $1,750,000. Payment will be issued on a monthly basis upon receipt of invoices based on actual services rendered. The contract and addendum are funded by a subgrant between the Mississippi Department of Human Services (MDHS) and Mississippi State University and the Office of Nutrition Education. The funding source for the subgrant is the United States Department of Agriculture (USDA). The funding for this agreement was approved by the USDA in May 2017 and the subgrant between MSU and MDHS was signed on July 5, 2017. The agreement, which was reviewed and approved by the IHL Associate Commissioner of Legal Affairs prior to the Board’s approval of this item, is on file in the Board Office. 8. MSU – Approved the request to enter into a three-year lease of a 5,409.1-square foot building and 1.2-acre parcel of land on Singing River Island, MS for the purpose of Unmanned Aircraft Systems (UAS) operations with the Department of Homeland Security. In accordance with Board Policy 707.03 Approval for Prepayment for Goods or Services, the Board approved the request to pay the quarterly rent in advance as is common in this industry. The agreement is for three years beginning October 1, 2017, and ending September 30, 2020. The contract may be renewed for up to five consecutive one-year periods upon written agreement of both parties. The Lessee will pay rent quarterly, in advance, in the amount of $8,523.88, totaling $34,095.52 annually. The rent is calculated as $5.00 per square foot for the building and $5,875 per acre for the ground lease ($5.00 x 5,409.1 square feet; $5,875 x 1.20 acres). The total rent amount for the 3-year lease totals $102,286.50. The lease will be funded under Task Order 03 of contract W56HZV-17-C-0095 between MSU and the US Army’s Tank Automotive Research, Development and Engineering Center. The agreement, which was reviewed and approved by the IHL Associate Commissioner of Legal Affairs prior to the Board’s approval of this item, is on file in the Board Office. 9. MSU – Approved the request to enter into a contract with STM Charters, Inc. for 9 round trip flights for the Men’s Basketball team during the winter of 2017-18 season. In accordance with Board Policy 707.03 Approval for Prepayment for Goods or Services, the Board approved the request to pay prior to the flights as is common in this industry. The contract shall commence on the date the contract is signed by both parties and terminate on the date of the last flight as set forth in the agreement. The total of all charters will be $354,206 to be paid with Athletic funds. The agreement, which was reviewed and approved by the IHL Associate Commissioner of Legal Affairs prior to the Board’s approval of this item, is on file in the Board Office. 10. MSU – Approved the request to enter into a contract with STM Charters, Inc. for 8 round trip flights for the Women’s Basketball team during the winter of 2017-18 season. In accordance with Board Policy 707.03 Approval for Prepayment for Goods or Services, the Board approved the request to pay prior to the flights as is common in this industry. The contract shall commence on the date the contract is signed by both parties and terminate on the date of the last flight as set forth in the agreement. The total of all charters will be $296,895 to be paid with Athletic funds. The agreement, which was reviewed and approved by the IHL Associate Commissioner of Legal Affairs prior to the Board’s approval of this item, is on file in the Board Office. 3 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 11. UM – Approved the request to enter into a contract with CodeLynx, Inc. to standardize pricing for software, hardware, and migration services as requested by the ID Center. The scope of work will be to migrate the ID Center’s current video management system (Qognify) to Avigilon Control Center (ACC). This includes the current cameras, both analog and digital. CodeLynx is to provide takeover licensing for the current 665 licenses, any hardware required for the migration, product training, and any additional licenses needed for future use. This contract includes a nonsolicitation clause that is in effect during the contract and for the twelve months following unless one party has the prior written approval of the other party; this clause also extends to any subcontract resulting from this contract. This contract will be for a period of one year from the start date of the signed contract with an option to renew each year up to an additional four years pending mutual agreement by both parties. The Board approved the full five years. The contract amount is estimated at a total of $458,056.80. The initial migration and licensing cost for the first year will total $208,221.60. The remaining $249,835.20 will be spent on estimated future licenses for years 2-5. The total estimated cost of the video surveillance system project is $612,888.75, which includes this agreement for the migration, hardware, and software licenses estimated at $458,056.80 and the sister agreement with ESSC, Inc. for the installation of security cameras estimated at $154,831.95. Funds for this contract will come from self-generated funds. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 12. UM – Approved the request from the Office of the Provost and Research and Sponsored Programs to amend an existing contract with Parker Executive Search to include four additional national searches for key leadership positions. UM is seeking professional assistance to fill four positions: Dean of the Graduate School, Dean of the School of Applied Sciences, Assistant Vice Chancellor for Research and Sponsored Programs, and Director of the Center for Educational Research and Evaluation. The existing contract commenced upon signing by the University, and will continue until successful completion of the Scope of Work as modified by the addition of these four searches. This modification will add $270,000 for the professional services to the original contract, plus direct expenses (capped at 10% or $27,000), plus actual costs for advertising, background investigations, interviews, and committee and candidate travel expenses. The estimated total for this modification is $350,000. The funding source for this contract will be educational and general funds. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 13. UM – Approved the request to enter into a contract with STM Charters, Inc. for passenger charter air transportation and related services for the 2017/2018 men’s basketball season to be provided by Elite Aviation. In accordance with Board Policy 707.03 Approval for Prepayment for Goods or Services, the Board approved the request to pay prior to the flights as is common in this industry. The contract will begin on October 20, 2017 and end on February 27, 2018. The contract amount is $443,200 which is billed in two installments. The funding source for this contract is the Athletics Department Operating Funds. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 14. UMMC – Approved the request to enter into a new Solid Waste Services Agreement (Agreement) with BFI Waste Services, LLC d/b/a Republic Services of Jackson (Republic) to provide solid waste removal, disposal, and recycling services at all UMMC locations in the Jackson area and Lexington, Mississippi, as well as potential future services in Grenada, Mississippi. The term of the Agreement is for five (5) years, beginning December 1, 2017, and ending November 30, 2022. 4 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 The estimated cost of the contract is $2,720,595.20 for the five (5) year term. A breakdown of the cost is included in the bound October 19, 2017 Board Working File. The contract will be funded by general funds. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 15. UMMC – Approved the request to amend its Agreement No. 18863, Bioplex® 2200 System Rental Agreement Plan (Agreement) with Bio-Rad Laboratories, Inc. (Bio-Rad) for the rental of a Bio-Plex 2200 System, Evolis Microplate Processor, and related equipment, as well as the purchase of consumables and service for the systems. The Bio-Plex and Evolis system are utilized to provide diagnostic laboratory testing, including testing for Rubella, Lupus, Measles, Mumps, Varicella, and Herpes Simplex Virus. Additionally, the Evolis system is an open-channel testing equipment that can run assays from manufacturers other than Bio-Rad as needed. The amendment will reduce UMMC’s commitment to purchase certain tests, reduce the costs for tests, add new tests and assays currently performed on other platforms at UMMC or sent to outside reference laboratories, provide additional training of the Evolis system, and clarify the Agreement start date. The term of the original Agreement is one (1) year with four (4) automatic one (1) year renewals. The start date of the Agreement was upon the “go-live date,” which was the date that the equipment was installed, calibrated, and tested sufficiently for operation in accordance with federal regulations. UMMC originally anticipated the go-live date to be October 1, 2014; however, the actual go-live date was July 1, 2015. The amendment does not change the term of the Agreement, but it clarifies the start date as July 1, 2015. The expiration date of the amended Agreement will be June 30, 2020. The original Agreement amount was estimated to be $1,906,923.56. Upon amendment, the total amount of the Agreement will decrease to $1,506,055.13. The agreement will be funded by hospital patient revenue. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 16. UMMC – Approved the request to enter into a Vizient Letter of Commitment agreement with Cardinal Health 200, LLC to access discount rate tiers and to participate in an agreement for freight management services. The purpose of this Agreement is to provide UMMC access to nationally negotiated shipping/freight pricing, the ability to deal directly with the shipping/freight companies, and complete visibility and transparency for UMMC’s incoming shipping/freight charges. The term of this agreement will be forty-nine (49) months, beginning on November 1, 2017, and ending conterminously with the Vizient Agreement on November 30, 2021. The estimated freight cost to be paid to Cardinal under the Agreement is $4,173,455.66, based on UMMC’s historical shipping costs. UMMC estimates approximately $1,937,632.64 in savings through the utilization of this program. The agreement will be funded by hospital patient revenues. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 17. UMMC – Approved an amendment to its current software license and service agreement with Corepoint Health, LLC in order to purchase additional integration/interface engine licenses, service and support to be used by UMMC and its Epic Community Connect (ECC) client, the Mississippi Department of Health (MDH). The original agreement provides the software license and support services for the enterprise integration/interface engine that allows for the integration of clinical and business systems at UMMC. The amendment will begin November 1, 2017, and end conterminously with the existing agreement on October 31, 2020. The total term of the amended agreement remains four (4) years, beginning November 1, 2016, and ending October 31, 5 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 2020. The estimated cost of the amendment is $168,400. The total estimated cost of the amended agreement is $371,700. This amendment will be funded by MDH. The original agreement is funded by patient revenues. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 18. UMMC – Approved the request to enter into a Locally Negotiated Agreement with Covidien Sales LLC to purchase vessel sealing, electrosurgery, smoke evacuation, ultrasonic cutting, and hardware products at discounted rates. These devices are basic and advanced hardware and associated products used primarily in the Operating Room to control bleeding, sealing, and cutting blood vessels during minor to extensive procedures. The term of the Agreement is three (3) years, beginning December 1, 2017, and continuing until November 30, 2020, which includes the initial one (1) year term and two (2) automatic one (1) year renewal terms. The estimated amount of the Agreement over the three (3) year term is $3,286,053.47. UMMC based its calculation on historical purchases, plus ten percent (10%) volume growth each year of the Agreement. The agreement will be funded by hospital patient revenues. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 19. UMMC – Approved Amendment 16 to its current license and support agreement with Epic Systems Corporation to add the Remote Monitoring Module onto UMMC’s current program property listing. This module will provide UMMC the ability to oversee an individual patient or a specific patient population from a remote location, which acts as a safety net to detect patient health deterioration earlier. The term of Amendment 16 will begin on or about November 1, 2017, and is coterminous with the current Epic License and Support Agreement which remains in effect in perpetuity regarding the licenses, and it is also coterminous regarding maintenance coverage which ends August 22, 2019. There is no new associated cost for Amendment Sixteen (16), as the fees are included in the Audio/Video Integration Module that was previously approved under Amendment Four (4). The total estimated approved cost for the Epic agreement remains $67,359,789.01. The amendment cost will be funded by hospital patient revenue. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 20. UMMC – Approved Amendment 17 to its current license and support agreement with Epic Systems Corporation to add the program property license for enhanced analytics and data warehousing, specifically by changing the Caboodle Data Warehouse licensing to a subscription basis, adding the Healthy Planet Enhanced Data Analytics module, adding ten (10) Predictive Analytics Models to UMMC’s current program property list, and changing the definition of Interface Unit to allow for expansion of UMMC’s interface license to cover the addition of Epic standard data connectors. The Caboodle Data Warehouse is an architecture for combing Epic and non-Epic data in a single, unified data model for reporting purposes. The Healthy Planet Enhanced Data Analytics will allow non-UMMC patient data to be brought into the Healthy Planet Module or Caboodle Warehouse Module. The Predictive Analytics Models will allow UMMC the ability to embed real-time predictive analytics directly into users’ workflows. The term of amendment 17 will begin on or about November 1, 2017, and is coterminous with the current Epic License and Support Agreement which remains in effect in perpetuity in regard to the licenses, and it is also coterminous regarding maintenance coverage which ends August 22, 2019. There is no new associated cost for Amendment Seventeen (17). The total estimated approved cost for the Epic agreement remains $67,359,789.01. The amendment cost will be funded by hospital patient 6 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 revenue. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 21. UMMC – Approved the request to enter into a Lease Agreement with Golden Triangle Regional Airport Authority (Authority) for the lease of hangar space for use by UMMC medical helicopter personnel and adjacent ground space for the placement of a modular office facility. The Lease Agreement will allow UMMC to continue to operate AirCare 3 from Golden Triangle Regional Airport, which is used for transporting critical care patients to UMMC or other designated receiving facilities for treatment. Pursuant to IHL policy 707.03 Approval of Prepayment for Goods or Services, the Board approved the request to prepay the lease amount on the first day of each month. The term of the Lease Agreement is nine (9) years, beginning April 1, 2018, and ending March 31, 2027. The total cost of the Lease Agreement over the nine (9) year term is $324,000.00. The monthly rent of $3,000 includes hangar space, non-exclusive access to public parking, access to utilities, and signage. The agreement will be funded by hospital patient revenue. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 22. UMMC – Approved the request to amend its agreement with Hologic (MA), LLC formerly known as Hologic Limited Partnership (Hologic) to reduce the commitment amount of ThinPrep pap reagents, as well as exchange existing equipment for new equipment at no additional cost. The purpose of the Agreement is to provide for the usage and maintenance of Papanicolaou anatomic preparation (pap) testing equipment and related testing supplies. In addition, Hologic will provide the ThinPrep Imaging System, a device that uses computer imaging technology to assist in primary cervical cancer screening. In return for the use and maintenance of the equipment, UMMC commits to purchase a minimum amount of ThinPrep pap reagents. The term of the amendment will begin November 1, 2017 and is coterminous with the original agreement which ends November 30, 2019. The total estimated cost of the amended Agreement over five (5) years is $2,136,876.06. The original Agreement cost was $2,276,511.70. With the reduction in committed purchases of ThinPrep pap reagents, UMMC expects to save approximately $139,635.64 in the final two (2) years of the amended Agreement. The agreement will be funded by hospital patient revenues. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 23. UMMC – Approved Amendment 2 to its current Master Services Agreement with Press Ganey Associates, Inc. to replace the Physician Quality Reporting System (PQRS) Consumer Assessment Healthcare Providers & Systems (CAHPS) Regulatory Survey with Merit-Based Incentive Payment System (MIPS) CAHPS Regulatory Survey. The term of amendment 2 will begin November 1, 2017, and is coterminous with the original agreement. The original agreement is for a period of five (5) years, beginning October 1, 2015, and continuing until September 30, 2020. There is no cost associated with Amendment 2. The total estimated cost of the contract over five (5) years remains $2,599,643.81. The contract will be funded by hospital patient revenue. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 24. UMMC – Approved Amendment 3 to its current Master Services Agreement with Press Ganey Associates, Inc. to add the Neonatal Intensive Care Unit (NICU) eSurvey Blend methodology to UMMC’s existing survey services and to add the Outpatient and Ambulatory Surgery (OAS) Regulatory CAHPS Wave 2 surveys to UMMC’s current Ambulatory Surgery eSurvey Blend services. The current Pediatric Inpatient Survey is not applicable to the NICU setting. NICU7 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 specific surveys will provide more meaningful data to physicians and staff within the NICU. The OAS CAHPS collects information about patients’ experiences of care in hospital outpatient departments and ambulatory surgery centers. This survey will be required by CMS in the near future. Early adoption of the OAS CAHPS survey can help improve performance and put UMMC in a stronger position to succeed when CMS mandates implementation. The term of amendment 3 will begin November 1, 2017, and is coterminous with the original agreement. The original agreement is for a period of five (5) years, beginning October 1, 2015, and continuing until September 30, 2020. Amendment 3 adds an annual cost of $1,500 for the addition of the NICU eSurvey Blend methodology. However, UMMC’s original calculations of the estimated agreement cost include enough funds to cover this additional cost. Therefore, the total estimated cost of the amended agreement over five (5) years remains $2,599,643.81. The contract will be funded by hospital patient revenue. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 25. UMMC – Approved the request to enter into an agreement with SG-2, LLC for the MarketEdge product and consulting services for benchmarking data and analytic capabilities to assist UMMC in its strategic planning for future growth and to improve quality of care provided to its patients. In accordance with Board Policy 707.03 Approval of Prepayment for Goods or Services, the Board approved the request to make annual prepayments for service. SG-2’s MarketEdge product and consulting services provide integrated data, analytic tools, implementation support, and advisory services to significantly enhance its provider service and marketplace planning and performance analysis capabilities. The term of this agreement is three (3) years beginning on or about November 1, 2017, and ending October 31, 2020. The estimated cost of this agreement over the three (3) year term is $925,000. A breakdown of costs is included in the bound October 19, 2017 Board Working File. The agreement will be funded by hospital patient revenues. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 26. UMMC – Approved the request to amend its Management Agreement with SP Plus Corporation formerly known as Central Parking of Mississippi LLC, to extend the agreement for one (1) year for continued parking staffing and management services for Parking Garages A and B, Parking Lots 17, 21, and the Pavilion Parking Lot on UMMC’s main campus. The Second Amendment also lowers UMMC’s monthly cost for the services provided. The amended Management Agreement has an initial term of three (3) years with the option to renew for two (2) consecutive one (1) year terms. The full (5) five-year term currently is effective from November 1, 2012, to October 31, 2017. The Second Amendment will extend the Management Agreement through October 31, 2018. The original agreement and First Amendment had a total estimated cost of $2,685,536.09 for the five (5) year term. Beginning in Year 2 of the original agreement, UMMC’s cost increased each year in an amount equal to the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U), U.S. City Average, as released by the U.S. Labor Department, Bureau of Labor Statistics. The Second Amendment will lower the monthly cost to $39,250 per month, or $471,000 for the term extension. The new total cost of the amended agreement is $3,156,536.09. The agreement will be funded by general funds. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 27. UMMC – Approved the request to enter into an End User Agreement (Agreement) with Stryker Sustainability Solutions, Inc. (Stryker) for consulting and reprocessing services for medical 8 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 devices labeled as single use devices. Reprocessing services include cleaning, sharpening, functional testing, sterile packaging, sterilization, and high-level disinfection for the medical devices, and reprocessing allows the devices to be resold and used for multiple uses. The cost of reprocessed devices is discounted greatly from the original price as a new item. The consulting and reprocessing services also include disposal of devices that cannot be reprocessed, at no additional cost. Through this Agreement, UMMC expects to achieve a significant savings through reduced purchase pricing of reprocessed medical devices and a reduction in costs associated with the handling and disposal of contaminated medical waste. The term of the Agreement is two (2) years and six (6) months, beginning November 1, 2017, and continuing through April 30, 2020, which is coterminous with Stryker’s agreement with Vizient. The estimated total cost of the agreement over the two (2) year and six (6) month term is $849,134.52, including shipping costs. The estimated total cost is based upon historical spend on new medical devices used in the Perioperative Services, Procedural, and Patient Care hospital departments, as discounted at the reprocessing rate. The discounted pricing for purchase of reprocessed medical devices will be based upon the percentage of reprocessed devices purchased annually for each device category. The typical market purchase percentage of reprocessed devices ranges from 60% to 80%. This is due to clinical need for OEM support for certain devices, as well as the ongoing need to purchase new devices, as used devices may be damaged or have reached their end of life and cannot be reprocessed again. However, for calculation of the total potential cost of this Agreement, UMMC assumed it would purchase up to 100% of reprocessed medical devices for the Perioperative Services, Procedural, and Patient Care hospital departments. At a 60% purchase level, the Agreement would allow UMMC to recognize estimated potential savings of $1,184,558.22 over the term of the Agreement. This agreement will be funded by hospital patient revenue. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 28. USM – Approved the Amended and Restated Lease with the University of Southern Mississippi Athletic Foundation (Foundation/Lessee). The premises involve approximately two acres of land known as the Payne Center parking lot located at 101 MK Turk Circle, Hattiesburg, MS 39406. The premises also include portions of the Reed Green Coliseum located adjacent to the proposed construction in the Payne Center parking lot. During the term of the Lease, the Foundation will construct a Wellness Center of approximately thirty thousand square feet in accordance with plans and specifications as approved by USM. The premises shall also include certain other underutilized athletic space as agreed upon by the parties hereto. The Foundation intends to sublease the premises to a third party for prepaid rent in order to allow the Foundation to perform the construction to the premises. The purpose of the Lease Agreement is to provide the Foundation the right to utilize the premises as needed and agreed upon by the parties, including the right to construct and lease/sublease a new Wellness Center and/or other athletics related space, including but not limited to the Reed Green Coliseum. All construction of the facilities by the Foundation shall be in accordance with plans and specifications as approved by USM. The term of the Lease shall commence subsequent to IHL Board approval and full execution of the Lease and shall expire on July 31, 2022. The contract amount shall be $1.00 cash in hand. This lease and subsequent sublease are being funded through the lease of athletic department facilities by the Mississippi Community Education Center (MCEC), a SOl(c)3 organization designed to provide schools, communities and families with educational services and training programs in South Mississippi. MCEC will use the subject facilities to support their programming efforts for South Mississippi. 9 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 MCEC's funding for this project is via a Block Grant from the Mississippi Department of Human Services. The funding from MCEC shall be prepaid rent to the Foundation in the amount of Five Million Dollars ($5,000,000) for the leasing of certain USM athletic facilities including but not limited to the to be constructed Wellness Center, Reed Green Coliseum and additional athletic space as agreed upon by USM and the Foundation. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 29. USM – Approved the Reimbursable Space Act Agreement between The National Aeronautics and Space Administration John H. Stennis Space Center (NASA) and the Mississippi Board of Trustees of State Institutions of Higher Learning for the Center of Higher Learning and Related University Activities (IHL). Under this Agreement, NASA provides space for IHL through the Center of Higher Learning (CHL) in order to facilitate the continued education of the NASA workforce. This Agreement further addresses the terms and conditions for non-academic activities which the IHL has authorized, pursuant to approval by NASA. The purpose of this Agreement is to define the relationship between NASA and CHL for the continued provision of academic and non-academic programs through the CHL at the John H. Stennis Space Center (SSC). Such programs, conducted by the CHL and associated institutions, are designed to meet the present and future higher education needs of SSC employees and persons from surrounding communities. The Stennis Space Center Policy Board on Higher Education is an advisory body appointed by the NASA / Stennis Center Director to provide broad oversight to CHL. The SSC Policy Board approves all new academic degree programs offered at the SSC by the CHL and their associated institutions; the list of proposed program offerings in Appendix A of this Agreement reflects previously-approved degree programs by the Policy Board. This agreement is a precursor to a Host-Tenant Agreement and Use Permit Agreement that will stipulate specifics as to pricing and space usage. This Agreement will be effective upon the date of the latest party’s signature and will expire five years from said date or until the completion of all obligations of the parties, whichever comes first. In accordance with the terms of the Agreement, IHL shall reimburse NASA an estimated cost totaling up to approximately $3,575,875 for NASA to carry out its responsibilities over the five-year term of the Agreement. This estimated total cost is based on the historical costs for the last five years of the Agreement and reflects expenditures by both the CHL and the USM Division of Marine Science. These expenditures are for floor space, utilities, badging and security, telecommunications and other costs associated with being a tenant at the SSC. A table of historical costs for the last five years is included in the bound October 19, 2017 Board Working File. This agreement will be funded by State of Mississippi Appropriations for Center of Higher Learning, Education and general funds for the Department of Marine Science. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 30. ASU – Exhibit 1 represents the approval of the Mississippi Information Technology Services (MS-ITS) Board to acquire Ellucian Technical Currency Services for Licensed Software for Alcorn State University (ASU). The Attorney General’s staff assigned to the MS-ITS reviewed this amendment prior to its execution. The supplement to the Master Agreement for software and services is between Ellucian Company, L.P. and MS-ITS behalf of ASU. (See Exhibit 1.) 10 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 REAL ESTATE 31. UMMC – Approved the initiation of IHL 209-561, Campus HVAC Upgrades FY 18, and the appointment of Engineering Resource Group, Inc. as the design professional. This project will replace the air handler serving the existing main operating rooms and the aging rooftop units on the Pavilion building. The proposed project budget is $2,750,000. Funds are available from UMMC Shared Services Administration (SSA) – Building Improvement Funds ($2,750,000). 32. UMMC – Approved the initiation of IHL 209-562, Re-Roof Pavilion, and the appointment of Dean & Dean Architects as the design professional. This project will replace the failing and deteriorating roof on the Pavilion. The proposed project budget is $1.6 million. Funds are available from UMMC Shared Services Administration (SSA) Funds ($1,600,000). 33. JSU – Approved the request to increase the budget for GS 103-286, Stewart Hall Renovations, from $200,000 to $602,739.56, for an increase of $402,739.56. The Board also approved the request to add SB 2851, Laws of 2013, and 2014 JSU Funds to the project as funding sources to allow for the project budget increase. This is the first budget increase request made for this project by the university. The increase will to allow the continuation of the project through the construction document phase. Stewart Hall is currently vacant and unusable as a residential facility due to the deteriorated condition of interior finishes and mechanical systems. This is a 37,033 gross square foot (GSF) five (5) story brick facility with 90 rooms designed for a total of 180 student beds. The university is pre-planning a comprehensive renovation which will include envelope restoration, substantial reconfiguration, interior upgrades, ADA compliance issues, asbestos abatement, as well as, major renovations of the mechanical, electrical, plumbing, and life safety systems. The facility will be repurposed to be a state-of-the-art residential hall. Funds are available from SB 2906, Laws of 2015 ($200,000); SB 2851, Laws of 2013/JSU ($128,023.97); SB 2851, Laws of 2013/IHL-CEF ($31,545.29); and 2014 JSU Discretionary Funds ($243,170.30). 34. UMMC – Approved the request to sole source the HVAC controls portion of GS 109-223, Clinical Research Unit. The Request for Qualifications method was used to select the Foil Wyatt Architects as design professional. The university determined that it would benefit to extend the existing Johnson Controls System as a sole source to insure the operational integrity of the existing building system. The estimated value of the existing Johnson Controls EMCS is approximately $1,500,000. The probable cost of the project EMCS modifications is $135,000 which is a 9.0% modification. According to IHL and Bureau of Building EMCS procurement protocol for existing systems, the EMCS can and should be procured by single source procurement since the portion of the work related to the new renovation is less than 25% of the existing system as long as approval is obtained prior to bidding. The total project budget is $7.5 million. Funds are available from UMMC SSA – Building Improvement Funds ($7,500,000). 35. USM – Approved the purchase of property located at 3403 Pearl Street in Hattiesburg, MS from Roderick T. Wells and Dorothy Wells in the amount of $126,000. The property borders university property and is critical to the long-range plans of the university due to its location to campus. Upon acquisition, the university intends to demolish the existing structure and grass the lot so that it can be used for future parking and/or expansion. The university received two independent property appraisals in the amounts of $137,000 and $120,000. The purchase price is $126,000 which is below the average of the property’s two appraised values. The closing shall be held at a location mutually agreeable to the parties on or before November 17, 2017 or upon such earlier or later date and time per agreement by the parties. A Phase I Environmental Site Assessment (ESA) has been 11 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 conducted on the property. Based on site available information, no recognized environmental conditions are evident at the subject property. A copy of the property description and all legal documentation are on file with the IHL Office of Real Estate and Facilities. The Attorney General’s Office has reviewed and approved this item. LEGAL 36. ASU – Approved the contract with Ware│Immigration, to provide services necessary in preparing labor certification documents on behalf of ASU for its employees who seek permanent residence status and related immigration matters. The contract term is one year beginning October 1, 2017. The fee schedule is as outlined below with a maximum amount payable of $20,000. The Attorney General’s Office has approved this request. Schedule of Legal Fees for Academia Nonimmigrant Petitions and Processes H-1B petition H-1B extension or amendment petitions $1500.00 $1000.00 TN petition or border/consulate processing TN extension petition $1500.00 $1000.00 E-3 petition or consular processing E-3 extension petition $1500.00 $1000.00 O-1 petition O-1 extension or amendment petition $4000.00 $1500.00 Change of status or extension of status for dependents (I-539) no additional charge J-1 waiver (IGA or hardship) $6,000.00 J-1 waiver (Conrad) $6,000.00 Permanent Residence Process with Labor Certification: Faculty $2000.00 Special Handling labor certification $2500.00 if position must be readvertised $1500.00 Additional fee if audited. $2500.00 Immigrant petition $1500.00 Adjustment of status and related applications (I-765, I-131, etc.) for employee, if handled together with I 140 $2000.00 “Standalone” adjustment of status and related applications $750.00 Adjustment of status and related applications, each spouse or child, if together with principal application and I 140 $1000.00 “Standalone” adjustment of status and related, each spouse or child Permanent Residence Process with Labor Certification: Non-Faculty $4000.00 Labor certification ($500-$1500.00 Additional fee if audited) ($2500.00 Additional fee if subject to supervised recruitment) $2500.00 Immigrant petition $2000.00 Adjustment of status and related applications (I-765, I-131, etc.) for employee $2500.00 Standalone AOS and related applications $750.00 Adjustment of status and related applications, each spouse or child $1000.00 Standalone AOS for each spouse or child 12 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 Permanent Residence Process: Outstanding Professors and Researchers $6000.00 Immigrant petition $1500.00 Adjustment of status and related applications for employee $2000.00 Standalone AOS and related $750.00 Adjustment of status and related applications, each spouse or child $1000.00 Standalone dependent AOS and related Permanent Residence Process: National Interest Waiver $6000.00 Immigrant petition $1500.00 Adjustment of status and related applications by employee $2000.00 Standalone AOS and related $750.00 Adjustment of status and related applications each spouse or child $1000.00 Standalone AOS and related, dependents Employment Authorization and Advance Parole Renewal $500 Employment Authorization Renewal per individual $500 Advance Parole Renewal per individual General Legal Advice and Unusual Matters Which Fall Outside This Fee Schedule Such matters will be billed at our hourly rates: David Ware $350 per hour billed. WI Partners $350 per hour billed. Associate Attorneys: $250 per hour billed. Paralegals: $175 per hour billed. 37. MSU – Approved the request to modify a contract with Butler Snow LLP, to provide services necessary in the practice areas of intellectual property and commercial matters; this representation does not and is not intended to include any representation by law firm for or on behalf of the University as bond counsel or in any related role in connection with any financing transaction undertaken by or for the University, including other matters which may concern advice in connection with indebtedness of the University. The initial contract entered into on October 17, 2013 was modified by Modifications 1-3, each extending the term for one year, with the current term expiring October 16, 2017. Modification #4 will extend the term of the contract for an additional year or through October 16, 2018. Blended hourly rate for all attorneys is increased from $240 per hour to $295 per hour. Rate for legal assistants shall remain at $95 per hour. Total amount payable during the extension period shall not exceed $75,000. All other provisions of the Agreement for Legal Services dated October 17, 2013 shall remain in effect. The Modification has been approved by the Office of the Attorney General. 38. MSU – Approved the request to modify a contract with the firm of Valauskas Corder, LLC located at 150 South Wacker Drive, Suite 620, Chicago, IL 60606, as outside counsel for the provision of services necessary in assisting the University with various patent applications, identification and forensic analysis of intellectual property, prosecution of patent applications, trademark registration applications, copyright registration applications, preparing and negotiating agreements and other related intellectual property and commercialization issues. The initial contract entered into on November 17, 2011 was modified by Modifications 1-5, each Modification extending contract terms for one (1) year. Modification #6 will extend the term until November 16, 2018. Current attorneys providing services are Charles Valauskas, Allison Corder, and Paul K. Judd. All other provisions of the Agreement for Legal Services dated November 17, 2011, shall remain in effect, 13 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 with hourly rates ranging from $225-$425, and total amount payable under this extension shall not exceed $100,000. This Modification has been approved by the Office of the Attorney General. 39. MSU – Approved the request to enter into a contract with The Winfield Law Firm, P.A. as outside counsel to provide legal services necessary in assisting the University in the areas of higher education law, employment law, real estate matters, compliance, and other local matters, at an hourly rate of $165.00. The contract will be effective November 1, 2017, for an initial term of one (1) year. The total amount payable during the contract shall not exceed $50,000. This request has been approved by the Office of the Attorney General. PERSONNEL REPORT 40. EMPLOYMENT Jackson State University • Steven Smith, Interim Vice President for Enrollment Management, Institutional Research & Assessment; salary of $24,900 for 3 months; effective September 5, 2017 – November 30, 2017 Mississippi University for Women • Rita C. Hinton; rehired retiree; reemployment position: Emerita Professor of Philosophy; salary of $29,155 per annum, pro rata; E&G Funds; reemployment period: August 21, 2017 – December 18, 2017 Mississippi Valley State University • Chresteen Seals; rehired retiree; reemployment position: Site Coordinator at Coahoma Community College; salary of $20,000 per annum, pro rata; E & G Funds; reemployment period: July 1, 2017 - April 30, 2018 41. CHANGE OF STATUS University of Mississippi • Noel Wilkin; from Interim Provost and Executive Vice Chancellor for Academic Affairs, Professor of Pharmacy Administration and Research Professor in the Research Institute of Pharmaceutical Sciences; salary of $290,000 pro annum, pro rata; E&G Funds; to Provost and Executive Vice Chancellor of Academic Affairs, Professor of Pharmacy Administration and Research Professor in the Research Institute of Pharmaceutical Sciences; Ph.D.; salary of $385,000 per annum, pro rata; E&G Funds; 12-month contract; effective September 22, 2017 42. SABBATICAL Jackson State University • Mukesh Kumar; Associate Professor and Interim Program Director, Urban Planning-PHD; salary of $69,904, this will be an unpaid leave; effective September 1, 2017 – May 31, 2018 14 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017   43. EMERITUS STATUS University of Southern Mississippi  William W. Powell, Associate Professor Emeritus of TESOL & French; effective July 1, 2017 ADMINISTRATION/POLICY 44. ASU – Approved the university’s mission statement as follows: Alcorn State University, a Historically Black College and University, is a comprehensive landgrant institution that celebrates a rich heritage with a diverse student and faculty population. The University emphasizes intellectual development and lifelong learning through the integration of diverse pedagogies, applied and basic research, cultural and professional programs, public service and outreach, while providing access to globally competitive academic and research programs. Alcorn strives to prepare graduates to be well-rounded future leaders of high character and to be successful in the global marketplace of the 21st century. 45. DSU – Approved the revisions to the university’s mission statement as follows: As a regional Carnegie Master’s I university located in Cleveland, Mississippi, Delta State University serves as an educational and cultural center for the Mississippi Delta, emphasizing service to the Northern Delta and contiguous counties and its campus centers in Clarksdale and Greenville in traditional and distance education formats. The University offers undergraduate, graduate and continuing education programs of study leading to baccalaureate and master’s degrees in the Colleges of Arts and Sciences, Business and Aviation, Education and Human Sciences, and the School of Nursing, as well as the Educational Specialist degree and Doctorates in Education and Nursing Practice. Emphasis is placed on excellence in instruction, followed by service and research, in the creation of a community of scholars. With special attention to small classes, a friendly environment, and a broad liberal arts foundation, the University encourages significant student-faculty interactions. Delta State provides programs and services that promote intellectual, cultural, ethical, physical, and social development. Students from different cultural, socioeconomic, and ethnic backgrounds will develop the ability to respect and evaluate the thoughts of value others; to develop, assess, and express their own thoughts effectively; and, to use the techniques of research and performance associated with their disciplines. 46. JSU – Approved the university’s mission statement as follows: The university produces technologically advanced, diverse, ethical, global leaders who think critically, address societal problems, and compete effectively. 47. MSU – Approved the university’s mission statement as follows: Mississippi State University is a public, land-grant university whose mission is to provide access and opportunity to students from all sectors of the state’s diverse population, as well as from other states and countries, and to offer excellent programs of teaching, research, and service. Enhancing its historic strengths in agriculture, natural resources, engineering, mathematics, and natural and physical sciences, Mississippi State offers a comprehensive range of undergraduate and graduate programs; these include architecture, the fine arts, business, education, the humanities, the social and behavioral sciences, and veterinary medicine. 15   MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 The university embraces its role as a major contributor to the economic development of the state through targeted research and the transfer of ideas and technology to the public, supported by faculty and staff relationships with industry, community organizations, and government entities. Building on its land-grant tradition, Mississippi State strategically extends its resources and expertise throughout the entire state for the benefit of Mississippi’s citizens, offering access for working and place-bound adult learners through its Meridian Campus, Extension, and distance learning programs. Mississippi State is committed to its tradition of instilling among its students and alumni ideals of diversity, citizenship, leadership, and service. 48. MUW – Approved the revisions to the university’s mission statement as follows: Mississippi University for Women (MUW), a public institution since 1884, provides high-quality undergraduate and graduate education for women and men in a variety of liberal arts and professional programs, while maintaining its historic commitment to academic and leadership development for women. MUW emphasizes a personalized learning environment in all of its educational programs, which are offered through the College of Arts, and Sciences, and Education, College of Business and Professional Studies, College of Education and Human Sciences, and College of Nursing and Health Sciences Speech-Language Pathology. MUW delivers selected programs and courses through distance education formats to provide educational opportunities throughout Mississippi and the United States, while addressing the unique educational and public service needs of northeast Mississippi and adjoining counties in northwest Alabama. MUW supports research, scholarship, and creativity to enhance faculty development and student learning and to advance knowledge in the disciplines offered by the university. 49. MVSU – Approved the university’s mission statement as follows: Mississippi Valley State University, as a Carnegie Classified Master's University, provides comprehensive undergraduate and graduate programs in education, the arts and sciences, and professional studies. The University is driven by its commitment to excellence in teaching, learning, service, and research--a commitment resulting in a learner-centered environment that prepares critical thinkers, exceptional communicators, and service-oriented, engaged, and productive citizens. MVSU is fundamentally committed to positively impacting the quality of life and creating extraordinary educational opportunities for the Mississippi Delta and beyond. 50. UM & UMMC – Approved the revisions to the UM and UMMC vision and mission statements as follows: Vision Statement As a great American public university, The University of Mississippi will lead and excel by engaging minds, transforming lives, and serving others. aspires to be a preeminent public international research university and a leading force for innovation and opportunity in Mississippi, the United States, and the world. Mission Statement As Mississippi’s flagship university and academic medical center, the University of Mississippi transforms lives, communities, and the world by providing opportunities for the people of Mississippi and beyond through excellence in learning, discovery, healthcare, and engagement. 16 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 Oxford & Regional Campus Mission The mission of the University of Mississippi mission is to create, evaluate, share, and apply knowledge in a free, open, and inclusive environment of intellectual inquiry. Building upon a distinguished foundation in the liberal arts, the state’s oldest first comprehensive university serves the people of Mississippi and the world through a breadth of academic, research, and professional, and service programs. The University of Mississippi provides an academic experience that emphasizes critical thinking; encourages intellectual depth and creativity; promotes research and creative achievement to advance society; uses its expertise to engage and transform communities; challenges and inspires a diverse community of undergraduate, graduate, and professional students; provides offers enriching opportunities outside the classroom; supports lifelong learning; and develops a sense of global responsibility. Medical Center Campus Mission The mission of the University of Mississippi Medical Center is to improve the health and well-being of patients and the community through excellent training for health care professionals, engagement in innovative research, and the delivery of state-of-the-art health care. 51. USM – Approved the university’s mission statement as follows: The University of Southern Mississippi is a community of engaged citizens, operating as a public, student-centered, doctoral-granting research university serving Mississippi, the nation, and the world. The University is dedicated to scholarship and learning, integrating students at all levels in the creation and application of knowledge through excellence in teaching, research, creative activities, outreach, and service. The University nurtures student success by providing distinctive and competitive educational programs embedded in a welcoming environment, preparing a diverse student population to embark on meaningful life endeavors. ACADEMIC AFFAIRS Presented by Trustee Tom Duff, Chair On motion by Trustee Duff, seconded by Trustee Parker, all Trustees legally present and participating voted unanimously to approve agenda item #1 as submitted on the Academic Affairs Agenda. 1. SYSTEM – Approved the following recommended actions based on the Academic Program Productivity Reviews: a. Continue with stipulation the following 20 academic programs (subject to additional review by the IHL Office of Academic and Student Affairs for two years to assess progress toward future productivity): ASU – Bachelor of Arts in Sociology (CIP 45.1101) ASU – Bachelor of Science in Computer Science (CIP 11.0101) ASU – Bachelor of Science in Robotics and Automation Technology (CIP 15.0405) DSU – Master of Science in Community Development (CIP 44.0201) JSU – Bachelor of Science in Mathematics Education (CIP 13.1311) JSU – Master of Education in Elementary Education (CIP 13.1202) JSU – Master of Education in Secondary Education (CIP 13.1205) JSU – Master of Science in Environmental Science (CIP 30.103) JSU – Masters in Science and Mathematics Teaching (CIP 13.9999) MUW – Bachelor of Arts in Music – (CIP 50.0901) 17 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 MVSU – Bachelor of Science in Computer Science (CIP 11.0101) MVSU – Bachelor of Science in Elementary Education (CIP 13.1202) MVSU – Bachelor of Arts in Art (CIP 50.0101) USM – Bachelor of Science in Electronics Engineering Technology (CIP 15.0303) USM – Bachelor of Arts in Philosophy (CIP 38.0101) USM – Master of Science in Polymer Science and Engineering (CIP 14.3201) USM – Master of Science in Forensics (CIP 43.0106) USM – Doctorate in Kinesiology (CIP 31.0505) USM – Doctorate in Criminal Justice (CIP 43.0104) USM – Doctorate in Geography (CIP 45.0701) b. Delete - DSU – Bachelor of Arts in Political Science (CIP 45.1001). FINANCE AGENDA Presented by Trustee Christy Pickering, Chair Trustee Pickering removed agenda item #1 for further review. On motion by Trustee Pickering, seconded by Trustee McNair, all Trustees legally present and participating voted unanimously to approve agenda item #1 as submitted on the Finance Agenda. On motion by Trustee Pickering, seconded by Trustee McNair, all Trustees legally present and participating voted unanimously to approve agenda item #2. On motion by Trustee Pickering, seconded by Trustee McNair, all Trustees legally present and participating voted unanimously to approve agenda item #3. On motion by Trustee Pickering, seconded by Trustee Duff, all Trustees legally present and participating voted unanimously to approve agenda item #4. On motion by Trustee Pickering, seconded by Trustee Hooper, all Trustees legally present and participating voted unanimously to approve agenda item #5. 1. SYSTEM – Request approval for first reading of the revisions to Board Policy 906 Educational Building Corporations. (See Exhibit 2.) (THIS ITEM WAS REMOVED FROM THE AGENDA FOR FURTHER REVIEW.) 2. UMMC – Approved the request to enter into a Customer Agreement with CareFusion Solutions, LLC to purchase dedicated and non-dedicated intravenous (IV) disposable sets, including pump sets, gravity sets, extension sets, connectors, secondary sets, and accessories at a discount in exchange for a commitment to purchase at least $1,000,000 per year and 90% of UMMC’s total need for IV disposable sets. UMMC currently owns 1,996 CareFusion IV pumps that require use of dedicated CareFusion IV disposable sets due to compatibility. By combining the dedicated sets and non-dedicated sets under this agreement, UMMC qualifies for a higher discount on the products. The term of the agreement is for five (5) years – November 1, 2017 through October 31, 2022. The total estimated cost for the five (5) year contract term is $8,738,381.30. Beginning in Year 2, UMMC has calculated an annual increase of five and one-half percent (5.5%) for potential price increases and volume growth each year of the agreement. The agreement will be funded by patient revenue. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 3. UMMC – Approved Amendment 2 to its agreement with Crothall Healthcare, Inc. to add Statement of Work #4 to the agreement, which includes services for the remainder of UMMC’s facilities in Jackson, including its academic, research, and service department facilities. The original contract term for the master agreement is for five (5) years beginning November 1, 2015. 18 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 The Second Amendment will be effective November 1, 2017, with services commencing on or about December 1, 2017. The Second Amendment’s expiration will coincide with the original agreement on October 31, 2020. The total cost of Statement of Work #4 is $11,821,604.85, including all potential and variable costs. UMMC will pay semi-monthly fixed costs for housekeeping services. Beginning in Year 2, annual prices will increase by CPI or three percent (3%), whichever is less. Should UMMC terminate Statement of Work #4 prior to its expiration, UMMC will pay the unamortized balance for Crothall’s opening expenses, and UMMC will have the option to pay the unamortized balance for any equipment purchases made by Crothall. If Crothall’s costs to perform the services increases by more than fifteen percent (15%), UMMC and Crothall will renegotiate a new rate, and UMMC will present the amendment to the IHL Board with a request for the increase at that time. A breakdown of costs is available in the bound October 19, 2017 Board Working File. This agreement will be funded by general funds. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. 4. UMMC – Approved the request to initiate the bond process for up to $91 million for the Medical Center Educational Building Corporation for the purpose of expanding Children’s of Mississippi, including a new tower with expanded neonatal intensive care unit (NICU), pediatric intensive care unit (PICU), new pediatric imaging center, new dedicated surgical suites, related infrastructure, outpatient clinics, clinics and parking garage. It should be noted that the original request was for bonds up to $132 million. After discussion within the Health Affairs Committee on October 18, 2017, the request was revised to $91 million with the understanding that should additional money be needed the University of Mississippi would loan the money to UMMC internally. The expansion will also include a new lobby with critical infrastructure (food/chapel/gift shop) and dedicated patient elevators. The building will double the size of pediatric clinical space at the Medical Center to meet existing and future patient needs. The Board approved the payment of costs of issuance, sale and delivery of the bonds and other necessary bond documents and the financial advisor’s report provided by Hilltop Securities. The Board approved the following professionals: Hilltop Securities as financial advisor; Butler Snow LLP as bond counsel; and JP Morgan, Morgan Stanley, and Raymond James as underwriters. Bond counsel has agreed to donate its fee up to $250,000 to the Children’s of Mississippi Expansion project. The expansion is needed to provide approximately 340,000 square feet of additional space to provide NICU, PICU, surgery, clinic and outpatient clinics and dedicated pediatric imaging space for its pediatric patients. Long-term and intermediate term fixed rate bonds will be issued with maturities up to thirty (30) years. UMMC is expecting to issue up to a maximum of $91,000,000 par value in taxexempt, fixed rate bonds. Proceeds from the bond issue will support the project fund, capitalized interest, costs of issuance and the underwriter’s discount. Based on the Financial Advisor’s report dated September 21, 2017, the proposed debt amortization will have an annual debt payment as follows: FY 2019–2042 is $4,883,325; and FY 2043-2047 is $18,145,000. Funds are available from Patient Revenues, Development Funds. 5. UMMC – Approved the request to enter into a Service Agreement with ThyssenKrupp Elevator Corporation (ThyssenKrupp) to provide elevator maintenance service for 125 elevators located on UMMC’s main campus and new Belhaven facility, as well as facilities located in Lexington and Grenada, MS. The term of the Agreement is for five (5) years from November 1, 2017, through October 31, 2022. The total estimated cost of the Agreement over the five (5) year term is $3,602,804.87. Any price increases under the Agreement, including increased fuel costs and 19 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 elevator examiner rate charges, are capped at three and one-half percent (3.5%) increase per year and subject to approval by UMMC. The agreement will be funded by general funds. The agreement, which was reviewed and approved by the Attorney General’s Office prior to the Board’s approval of this item, is on file in the Board Office. LEGAL AGENDA Presented by Trustee Alan Perry, Chair Trustee Perry moved agenda items #1 and #2 to the Executive Session Agenda for consideration. 1. MVSU – Request to settle the IHL Self-Insured Workers’ Compensation Program Claim No. 558703-1. (THIS ITEM WAS MOVED TO EXECUTIVE SESSION.) 2. UMMC – Request to settle Tort Claim number 3133. (THIS ITEM WAS MOVED TO EXECUTIVE SESSION.) INFORMATION AGENDA Presented by Commissioner Glenn F. Boyce FINANCE 1. SYSTEM - In accordance with the Jake Ayers, Jr., et al. and United States of America v Ronnie Musgrove, Governor, State of Mississippi, et al. Settlement (aka: Ayers Settlement Agreement), the IHL Board, through its counsel, shall provide to lead counsel for the private plaintiffs and counsel for the United States an annual disclosure report reflecting specified line-item information. This document is due October 1 of each year and has been presented to the Court. Each member of the IHL Board is being provided a copy of the 2017 Ayers Accountability Manual as required by the Ayers Settlement Agreement. A copy is on file at the Board Office. REAL ESTATE 2. SYSTEM – The Board received the Real Estate items that were approved by the Board staff subsequent to the August 17, 2017 Board meeting in accordance with Board Policy 904 Board Approval. (See Exhibit 3.) LEGAL 3. SYSTEM – The Board received a report of the payment of legal fees to outside counsel. (See Exhibit 4.) ADMINISTRATION/POLICY 4. SYSTEM – The following items have been approved by the Commissioner on behalf of the Board and are available for inspection at the Board Office. a. ASU - In accordance with Board Policy 707.01 Land, Property, and Service Contracts, “The Commissioner is authorized and empowered to approve non-oil, gas and mineral leases in an amount equal to or less than $100,000.” On October 4, 2017, Commissioner Glenn F. Boyce approved the proposed Motor Vehicle License to Use Agreement 20 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 between the university and Toyota Motor Sales, U.S.A., Inc. for the use of a Toyota Rav4 vehicle by the ASU Athletic Department as part of a partnership between the SWAC and Toyota. The IHL Associate Commissioner for Legal Affairs has reviewed and approved the contract document. b. MSU – In accordance with Board Policy 707.01 Land, Property, and Service Contracts, “The Commissioner is authorized and empowered to approve non-oil, gas and mineral leases in an amount equal to or less than $100,000.” On October 4, 2017, Commissioner Glenn F. Boyce approved the Lease Agreement addendum #2 between the university and the MSU Research and Technology Corporation (MSU-RTC) for 352 square feet of office space located in the MSU-RTC Incubator Building in Starkville, MS. This is the 2nd renewal of an existing Lease that began on October 1, 2016, at an annual cost of $5,280. All provisions of the agreement remain unchanged. The IHL Associate Commissioner for Legal Affairs has reviewed and approved the contract documents. ANNOUNCEMENTS • • • • • • Commissioner Glenn Boyce noted that each trustee received a draft copy of the 2015-2016 Education Achievement Council (EAC) Report Card for each of the Mississippi public universities. These reports are required by law and will be provided to the EAC for approval next week. President C.D. Smith announced that the next scheduled Board meeting will be November 16, 2017 at the Board Office. President Smith invited the university presidents to report on current activities on their campuses. Trustee Walt Starr reported that Mr. David Buford, IHL Director of Risk Management, recently conducted a thorough review and assessment of each of the Mississippi public university’s procedures related to sexual assault complaints and whether counseling services are available for those involved in incidents. Mr. Buford was able to conduct a thorough review without contacting university staff because ample information was readily available through the internet. Students will likely use this method to educate themselves, in addition to what they remember from orientation and related past trainings. No two universities had the exact same policy, but it is apparent that all are following pertinent Title IX regulatory guidance. Trustee Starr thanked all eight universities for proactively working to prevent incidents, to educate the campus population, and to create safe environments for students. Chancellor Jeff Vitter introduced Dr. Noel Wilkin who was recently promoted to Provost and Executive Vice Chancellor of Academic Affairs, Professor of Pharmacy Administration and Research Professor in the Research Institute of Pharmaceutical Sciences. President Smith thanked the students representing the student government associations at the universities who took time from their busy schedules to participate in the Board meeting. 21 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 ACADEMIC AFFAIRS COMMITTEE REPORT Wednesday, October 18, 2017 The meeting was called to order by Chairman Tom Duff at approximately 1:30 p.m. The following items were discussed. 1. On motion by Trustee Hooper, seconded by Trustee Dye, with Trustees Pickering and Smith absent and not voting, all Trustees legally present and participating voted unanimously to approve the authorization to plan an Executive Master of Science in Population Health Management degree program (CIP 51.2208) at the University of Mississippi Medical Center. 2. On motion by Trustee Rouse, seconded by Trustee Dye, with Trustees Pickering and Smith absent and not voting, all Trustees legally present and participating voted unanimously to approve the authorization to plan a Bachelor of Science in Health Sciences degree program (CIP 51.9999) at the University of Southern Mississippi. 3. By consensus, the Committee adjourned at approximately 1:50 p.m. The following Committee members attended the meeting: Mr. Tom Duff (Chair), Dr. Ford Dye, Mr. Shane Hooper, Ms. Ann Lamar, Dr. Alfred McNair, Mr. Chip Morgan, Mr. Hal Parker, Mr. Alan Perry, Dr. Doug Rouse, and Dr. Walt Starr. Ms. Christy Pickering and Mr. C.D. Smith were absent. HEALTH AFFAIRS COMMITTEE REPORT Wednesday, October 18, 2017 The meeting was called to order by Chairman Ford Dye at approximately2:00 p.m. The following items were discussed. 1. The Committee discussed the request by the University of Mississippi Medical Center to initiate the bond process for up to $132 million for Medical Center Educational Building Corporation for the purpose of expanding Children’s of Mississippi, including a new tower with expanded neonatal intensive care unit (NICU), pediatric intensive care unit (PICU), new pediatric imaging center, new dedicated surgical suites, related infrastructure, outpatient clinics, clinics, and parking garage. No action was taken. 2. By consensus, the Committee recessed at 4:00 p.m. The following Committee members were present for the first half of the meeting: Dr. Ford Dye (Chair), Mr. Tom Duff, Mr. Shane Hooper, Ms. Ann Lamar, Dr. Alfred McNair, Mr. Chip Morgan, Mr. Hal Parker, Mr. Alan Perry, Ms. Christy Pickering, Dr. Doug Rouse, and Dr. Walt Starr. Mr. C. D. Smith was absent. 3. Chairman Ford Dye reconvened the meeting at approximately 4:30 p.m. The following Committee members were present for the remainder of the meeting: Dr. Ford Dye (Chair), Mr. Tom Duff, Mr. Shane Hooper (by phone), Ms. Ann Lamar, Dr. Alfred McNair, Mr. Chip Morgan, Mr. Hal Parker, Mr. Alan Perry, Ms. Christy Pickering, Dr. Doug Rouse, Mr. C.D. Smith, and Dr. Walt Starr. 4. The Committee continued its discussion of the bond issuance for the UMMC expansion of Children’s of Mississippi. No action was taken. 5. By consensus, the Committee adjourned at approximately 4:50 p.m. 22 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 MISSISSIPPI VALLEY STATE UNIVERSITY BOARD SEARCH COMMITTEE REPORT Wednesday, October 18, 2017 The meeting was called to order by Chairman Shane Hooper at approximately 4:55 p.m. The following item was discussed. 1. Executive Session On motion by Trustee Perry, all Trustees legally present and participating voted unanimously to close the meeting to determine whether to declare an Executive Session. On motion by Trustee Dye, seconded by Trustee Rouse, all Trustees legally present and participating voted unanimously to enter into Executive Session for the reason reported to the public and stated in these minutes, as follows: Discussion of a personnel matter at Mississippi Valley State University. During Executive Session, the following matters was discussed: The Committee discussed a personnel matter at Mississippi Valley State University. No action was taken. On motion by Trustee Perry, seconded by Trustee Parker, all trustees legally present and participating voted unanimously to return to open session. 2. On motion by Trustee Smith, seconded by Trustee Perry, with Trustee Starr absent and not voting, all Trustees legally present and participating voted unanimously to adjourn the meeting. The following Committee members attended the meeting: Mr. Shane Hooper (Chair), Mr. Tom Duff, Dr. Ford Dye, Ms. Ann Lamar, Dr. Alfred McNair, Mr. Chip Morgan, Mr. Hal Parker, Mr. Alan Perry, Ms. Christy Pickering, Dr. Doug Rouse, Mr. C.D. Smith, and Dr. Walt Starr. EXECUTIVE SESSION On motion by Trustee Hooper, seconded by Trustee Perry, all Trustees legally present and participating voted unanimously to close the meeting to determine whether to declare an Executive Session. On motion by Trustee Hooper, seconded by Trustee Perry, with Trustees Dye and Morgan absent and not voting, all Trustees legally present and participating voted unanimously to enter into Executive Session for the reasons reported to the public and stated in these minutes, as follows: Discussion of two state university litigation matters and one state university personnel matter. During Executive Session, the following matters were discussed and/or voted upon: On motion by Trustee Hooper, seconded by Trustee Pickering, with Trustee Dye absent and not voting, all Trustees legally present and participating voted unanimously to approve the settlement of Tort Claim No. 3133, styled as Steve Wright vs. UMMC, et al., as recommended by counsel. 23 MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017   On motion by Trustee Hooper, seconded by Trustee McNair, with Trustee Dye absent and not voting, all Trustees legally present and participating voted unanimously to approve the settlement of IHL Self Insured Workers’ Compensation Claim No. 55-8703-1, styled as Anthony McClung vs. MVSU, et al., as recommended by counsel. On motion by Trustee Hooper, seconded by Trustee Pickering, with Trustee Dye absent and not voting, all Trustees legally present and participating voted unanimously to approve to utilize the expedited process as listed in the Board Policy 201.0509 Institutional Executive Officer/Commissioner of Higher Education Search Process and to waive any parts of such policy that are not consistent with the action taken by this Board, and to name Dr. Jerryl Briggs as president of Mississippi Valley State University with a state salary of $215,000 with a possible foundation supplement up to $10,000, and to provide reimbursement of up to $1,000 for moving expenses, effective October 19, 2017. On motion by Trustee Pickering, seconded by Trustee McNair, with Trustee Dye absent and not voting, all Trustees legally present and participating voted unanimously to return to Open Session. ADJOURNMENT There being no further business to come before the Board, on motion by Trustee Pickering, seconded by Trustee Perry, with Trustee Dye absent and not voting, all Trustees legally present and participating voted unanimously to adjourn the meeting. President, Board of Trustees of State Institutions of Higher Learning Commissioner, Board of Trustees of State Institutions of Higher Learning 24   MINUTES OF THE BOARD OF TRUSTEES OF STATE INSTITUTIONS OF HIGHER LEARNING October 19, 2017 EXHIBITS Exhibit 1 Approval of MS-ITS to acquire Ellucian Technical Currency Services for Licensed Software for ASU. Exhibit 2 Request approval for first reading of the following revisions to Board Policy 906 Educational Building Corporations. Exhibit 3 Real Estate items that were approved by the IHL Board staff subsequent to the August 17, 2017 Board meeting. Exhibit 4 Report of the payment of legal fees to outside counsel. 25 EXHIBIT 1 October 19, 2017 ITS CONTRACT ACCEPTANCE Project Number 4390!! For Renewal of Banner License TO: RETURN TO: Felicia Harried Paula Conn ASU Dept. of Information Technology Services 3771 Eastwood Drive Jackson. MS 39211 Phone: 601-432-8046 Fax: 601-713-6380 DATE SENT: August 31. 2017 RETURN BY: September 14. 2017 INSTRUCTIONS: Please review the attached contract forwarded to you by the staff. if any materiat changes are needed to this contract, please mark all changes needed on the document and return to ITS for changes. You will be sent a revised copy to review before you sign this Contract Acceptance form. Otherwise, please select one of the options below and return this form to the address above. Please initial the appropriate line to indicate the contract has been reviewed a is accepted by your agency/institution and that all reviews by your agency attorney and management are complete: without changes with the following corrections to format or syntax: (attach additional pages if needed) a Number Correction Needed: Pl so list all if any. who will sign this contract on behalf of your agency: @None; we accept the signature of the Executive Director on our behalf Please add a signature line for the following person(s) from our agency: g?u CONTRACT DELIVERY (SELECT ONE): Send contracts to vendor via overnight delivery and bill our agencyiinstitution. Send contracts to vendor via regular United States Postal Service rnaii. AM ?63145!? 4/19/30 Alcorn State University . I . AUTHORIZED SIGNATUIQI My signature above indicates that my agencyl?institction is a full party to the above-referenced contract. with or without the signature of the agency executive on the body of the contract. My agency executive understands and agrees that: (1) by virtue of Section 25-53-21 of the Mississippi Code Annotated. as amended. the Executive Director of is the purchasing and contracting agent for the State of Mississippi in the negotiation and execution of all contracts for the acquisition of information technology equipment. software and services. and. as contracting agent. must be a party to any amendments. change orders, or lamination actions for the life of this contract; (2) ITS as contracting agent is not responsible or liable for the pericnnahce or non-performance of any of agency's contractual obligations. financial or otherwise. for this contract; and (3) my agencylinstitution is responsible for day-to-day management of the project and contract and at! business decisions pertaining thereto and must initiate any actions regarding payments. changes in scope. early termination. and invocation of any penalties de?ned herein. providing appropriate noti?cation to when required. Date Revised: 9! 14/2017 Attachment 2 EXHIBIT 1 October 19, 2017 PROJECT NUMBER 43900 SUPPLEMENT TO MASTER SOFTWARE LICENSE AND SERVICE AGREEMENT BETWEEN ELLUCIAN COMPANY LP. (SUCCESSOR BY ASSIGNMENT TO SUNGARD HIGHER EDUCATION AND ALSO FORMERLY KNOWN AS SUNGARD SGT, AND SCT SOFTWARE 8: RESOURCE MANAGEMENT CORP) AND MISSISSIPPI DEPARTMENT OF INFORMATION TECHNOLOGY SERVICES AS CONTRACTING AGENT FOR ALCORN STATE UNIVERSITY This document (hereinafter referred to as ?Supplement?) shall serve as a Supplementto the original Master Software License and Service Agreement (hereinafter referred to as ?Master Agreement?) executed on May 21. 1998. between Eiiucian Company L.P.. formerly known as ?SunGard SCT. inc.? and SGT Software Resource Management Corporation. and ?SunGard" (hereinafter referred to as ?Licensor? andlor ?Eilucian"), and Mississippi Department of information Technology Services (hereinafter referred to as as contracting agent for the age-holes and institutions of the State of Mississippi. it is understood by the parties that is executing this Supplement on behalf of Alcorn State University (hereinafter referred to as "Licensee?). and Licenses are sometimes collectively referred to herein as ?State." WHEREAS, the Licensee desires mesquite the Technical Currency Services as speci?ed herein; NOW THEREFORE, in consideration of the mutual understandings, promises, consideration and agreements set forth. the parties hereto agree as follows: 1) This Supplement will become effective on the date it is signed by all parties ("Effective Date?) and will continue in effect until October 31, 2024 unless terminated pursuant to Article 14 of the Master Agreement. Licensor agrees to provide the Technical Currency Services in accordance with Article 32 of the Master Agreement. 2) Licensor agrees to provide Licensee with Technical Currency Services for the Licensed Software identi?ed in the Licensee Order Form, which is attached hereto as Exhibit A and incorporated herein by reference, and at the fees and for the periods set forth therein. 3) Licensor represents and warrants that it will ensure its compliance with the Mississippi Employment Protection Act. Section 71-11-1. et seq. of the Mississippi Code Annotated and will register and participate in the status veri?cation system for all newly hired employees. The term ?employee" as used herein means any person that is hired to perform work within the State of Mississippi. As used herein. ?status veri?cation system" means the Illegal immigration Reform and immigration Responsibility Act of 1996 that is operated by the United States Department of Homeland Security, also known as the E~Verify Program, or any other successor electronic veri?cation system replacing the E-Verify Program. Licensor agrees to maintain records of such compliance and, upon request of the State, to provide a copy of each such veri?cation to the State. Liosnsor further represents and warrants that any person assigned to perform services here under meets the employment eligibility requirements of all immigration laws of the State of Mississippi. Licensor understands and agrees that any breach of these warranties may subject Licensor to the following: termination of this Supplement and ineligibility for any state or public contract in Page1 of6 Eiluci?an Company to Software License Service EXHIBIT 1 October 19, 2017 Mississippi for up to three (3) years, with notice of such canceilaiionltennination being made pubiic, or the toss of any license, permit, certi?cation or other document granted to Licensor by an agency. department or governmental entity for the right to do business in Mississippi for up to one (1) year. or is) both. in the event of soch tenninationlcanceliation. Licensor would also be liable for any additional costs incurred by the State due to contract cancellation or loss of license or permit. 4) The parties understand and agree that all terms and conditions set forth in the Master Agreement are incorporated herein by reference and that this acquisition is subject to and controlled by the terms and conditions set forth in the Master Agreement. 5) Ali other provisions in the underlying Master Agreement shall remain unchanged. For the faithful performance of the terms of this Supplement. the parties have caused this Suppiement to be executed by their undersigned representatives. State of Mississippi. Department of Eilucian Company LP. information Technology Services. on behalf of Aisorn State University By: By: Authorized Signature Authorized Signature Printed Name: Craig P. Orgeron. Printed Name: Title: Executive Director Title: Date: Date: Page 2 of 6 Ellucian Company Supplement to Software License 8: Service October 19, 2017 EXHIBIT 1 EXHIBIT A MISSISSIPPI LICENSE ORDER FORM TECHNICAL CURRENCY SERVICES Licensee: Alcom State University {?Liccnsee?) Delivery Address: 1000 Drive. Atcom State. MS 39096 Licensee is hereby obtaining Technical Currency Services forlhe Licensed Software listed beiowpursuantto the MasterSo?ware License and Services Agreement betwaon Eiiuctan and 11?s as Contracting Agent for the Agencies and institutions 0fthe State chississippidaled May 21. 1998 (the 'Master Agreement?). The fees due hereunder shall be in addition to any fees due under any prior Order Form. Amendment into between Eiiucien and either ITS orthe Board of Trustees of the Mississippi Institutions of Higher Learning. TABLE 1: Technical Gummy Services {Maintenance}: Technical Currency Year BeginsiEnds: November ?October 31 Technical Currency Expiration Date: October 31. 2024 Novsmhor 1 November 1-17. (snagomhsr 1' INovernbart Member-1 2 20 20;; Maintenance Paid in Arrears Banner Advancement 010150.00 519,022.00 520,719.00 521,540.00 522.410.00 523.300.00 524,230.00 Banner ??gment 88"? $4,355.00 $4,520.00 04.71000 54,000.00 05,004.00 05,200.00 05.51000 Banner Beaumont Management Integration Component 02,504.00 02.00100 $2,705.00 $2,007.00 03.02300 $3,144.00 $3,270.00 Banner Empiom Self-Seem 510,004.00 011,111.00 511,550.00 012,010.00 512409.00 512000.00 $13,519.00 33m" Facug??ggamww 33?? 07.12000 57.40000 $7,704.00 $0013.00 50.33300 $0,000.00 59.01300 Banner Finance 020020.00 530,705.00 532,027.00 033,300.00 504040.00 $30,020.00 $37,407.00 Banner Finance Sei?Sarvim 52.37000 52.47400 50573.00 52,070.00 02.70300 52.09400 $3,010.00 Banner Financiet Aid 522,042.00 523,540.00 524.400.00 025,470.00 320400.00 327540.00 020050.00 Ban?BrFinanci?Wd $0.00 $0.00 50.00 50.00 0000 so 00 $0.00 Page 3 0i 6 Etluoian Company 10 Software License 0. Service EXHIBIT 1 October 19, 2017 0Nnvambam; Novm barn 520. 719. 00 $22 410. 00 524. 233 OD Touch?al Webcheck' Banner Human Resources $19,155.06 519. 922. on $21. 548 .00 523.305.0411 BamerSmdenl $31,310.00 $02,503.00 533005.00 535,220.00 530,020.00 $30,094 .00 $39,010.00 Banner Student Salf-Sawlce $0,014.00 $0270.00 09,041.00 010027.00 010420.00 010045.00 011270.00 Voice Response EPOS 55,826.00 00.05000 50,301.00 05,553.00 86,315.00 07,000.00 50,371.00 Banner Workflaw 50.00 00.00 $0.00 $0.00 00.00 $0.00 $0.00 IM Need 02,020.00 02.03000 53.00400 53,170.00 53,303.00 03.43000 03,572.00 FM N000 Analysis 00.00 50.00 50.00 $0.00 $0.00 $0.00 $0.00 ?mnmgApplica?onXtendar Desktop 57,070.00 00.10500 00.51200 50,053.00 59,207.00 50,575.00 50,050.00 Bundle 01,102.00 51.24000 01.20000 51.04100 51,304.00 51,450.00 51,500.00 App?mmnx?mg we? ?We? 04.47300 $4,052.00 04.03000 05.03100 05,232.00 55.44200 55.05000 ng?fg??m?g?v?'f 51,057.00 01.41200 01.40000 51,527.00 01,500.00 01,051.00 01,710.00 Touch?clPaymeanatemy? 00,040.00 00.20000 $0,530.00 $0,001.00 07.0?300 00.35000 $7,650.00 $0,010.00 53.45000 03.50000 03,702.00 03,001.00 54.03000 54.10000- lntematAp?d??nrnr Enterprise 515.957.00 Editinn 517.635.00 $18,340.00 $19,074.00 $19,837.00 $20.63?.00 $21.45600 lntemnt Davaloper 80120 $0.00 50.00 $0.00 $0.00 $0.00 $0.00 $0.00 .. Ptoarammer $0.00 50.00 $0.00 $0.00 SILUB $0.90 $0.00 Relalicnai Database System 529370.00 530,337.00 $31.550.00 532.812.00 334.125. 00 $35. 490 OD $36,909.00 - - 8236 945.00:- 55248312300? 5258 278.00 ?56.53.13.003 5277.192. 00 5268 279 [10'0?120529931100? .T0l-a! Maintenancn Cos!? TQ 1: I the Component System Is owned by a third pasty. . Page 0 0! Elludan Company Supplemanl to 5011mm Ucama a. Service EXHIBIT 1 October 19, 2017 NOTES: The hours during which Maintenancewili be provided forcach Component System. the targeted response times forceriain de?ned categories oflviainienancc calls for each Component System. and other details and procedures (collectively. the "Maintenance Standards") relating to the provision of Maintenance for each Component System are described in the applicable Maintenance Standards stated below. The Technical Currency {Maintenance} amount: speci?ed in Tablet above will be re?ected by Enucian in annual invoices in arrears. Licensee will make payment for invoices in accordance with the terms ofArtIcle 10 of the Master Agreement and penalties for late payments shall be calculated in accordance with the terms 10.2 cfthe MasterAgreament. Following the Expiration Date cfthe ?nal Technical Currency Year (Le. October 31 . 2824. Technicai Currency Services may be extended upon mutual written agreement of the parties. in the tone ofan amendment to this Suppterneni signed by an authorized representative of each party hereto. Notwithstanding anything in the MasterAgreement to the contrary. except In the case of: a termination for cause as described in Article 14.1 or 14.2 oithe MasterAgroement. or as the resutt ofrnutuat written agreement ofthe parties as described in Article 14.3. or(c) a Iackot appropriation of funds as described in Article 2? of the Master Agreement. the Technicai Currency Term as it applies to each Baseline Component System tisted in Table 1 above is for the period beginning on the Commencement Date (Le. November 1. 2017) and shall continue. and remain in full force and effect. until the Expiration Date of the tinal Technical Currency Year. in accordance with its terms. Advantage Level Maintenance Standards i. De?ned Terms: "Notification" means communication to Eliucien's ActionLlne by means of: (ii Ellucian's Customorsirpport Center: (it) the placementcf a telephone call; or the sending of an small. In each case. In accordance with Eiiuclan's then-current policies and procedures for submitting such communications. ?Poorly One Call" means 3 Notification that Licensee believes thate Documented Defect has caused: a fuiifaltura 'crash") of its computer system; (it) a lull failure of the Licensed So?warc; ortiil) a faliure at its computer system or the Licensed Software which. in either case. prevents Licensee from data processing which is criticat to Licensee's operations on the day on which the alleged Documented Detect ls reported. "Priogtg We Can" means Notification that Licensee believes that a Documented Defect has caused a partiat failure of Licensee?s computer system or the Licensed Software which signi?cantly hinders its ability to perform data processing which is critics! to Licensee?s operations on the day on which the alleged Documented Defect is reported. Page 5 ct 6 Etlucicn Company 1-Av92017-Mastcr Supplement to Software License a Service EXHIBIT 1 October 19, 2017 gall" means 3 Noti?cation that Licensee believes that Documented Defect has caused an iniennitlenttelture of. or problem with. its computer system orthe Licensed Software that causes a signi?cantdeiayin Licensee's ability to perfonndata processing on the day on which the alleged Documented Detect is reported, but where the processing is no]; criticai to Licensee's operations. "agony Egur Catt" means a Noti?cation that Licensee beilevee that a Documented Defect has caused a problem with its computer system or the Licensed Software that does not signi?cantly affect critical processing. ii. Hours During Which Ellucian's "ActioniJne" Telephone SupportWili be Available to Licenseein Connection with the Provision of Maintenance: Five (5) days perweek. Monday through Friday. enoiudirrg United States holidays and holidays. from 85.10 AM to 8:00 PM (Central US Time). Ill. Targeted Response Times: With respect to Eilucian?s Maintenance obligations. wilt respond to Noti?cations from Licensee rotating to the Baseline Component Systems identi?ed in this Supplement in accordance with the foiiowing guidelines, with the time period to be measured beginning with Eilucian's receipt of the Notification: Priority One Coils "two (2) hours or less. Priority Two Cails iour (4) hours or less. Priority Three Calls -- twenty-four (24} hours or less. Priority Four Cells - seventy-two (72) hours or less. Notes: Forpurposes oithese targets. e'response'wiit mean an Etiuclan representative to Licensee to begin evaluation of the problem reported under one of the categories of calls identi?ed above; (2) As a prerequisite to Eliucian?s obligation to respond to Licensee. Licensee must follow the policies end procedures of Eliucien's ActionLine (such as the dialing of a particular phone number. the categorization of a particular problem. etc.) when submitting its Noti?cation. Page ii of Ellen-ion Company Supplement to Sohwere License Sconce EXHIBIT 2 October 19, 2017 SYSTEM – REQUEST FOR APPROVAL FOR FIRST READING OF REVISIONS TO BOARD POLICY 906 – EDUCATIONAL BUILDING CORPORATIONS 906 – EDUCATIONAL BUILDING CORPORATIONS Authority, Miss. Code Ann., Sections 37-101-61 and 37-101-63 (1972), as amended, grants the state institutions of higher learning the authority to form nonprofit corporations for the purpose of acquiring, or maintaining, equipping, improving or constructing facilities for use by the institution. These educational building corporations are granted the authority to issue bonds or other forms of debt obligations (if required for the type of debt to be issued) for the construction and renovation of facilities. Financial Advisor. Prior to Board consideration of an institution’s request to issue debt of the educational building corporation for the construction, maintenance, equipping, acquisition, and renovation of facilities or to refinance outstanding debt, Board staff, in conjunction with institutional staff, must select a financial advisor(s) to represent the interests of the Board, the educational building corporation and the institution. The financial advisor(s) shall meet such qualifications and perform such services as may be prescribed by the institution, the Board or its staff. Financial Advisor. Prior to Board consideration of an institution’s request to issue debt of the educational building corporation for the construction, maintenance, equipping, acquisition, and renovation of facilities or to refinance outstanding debt, the Commissioner shall designate a financial advisor(s) to advise the Board with respect to the likely impacts and the prudency of the proposed transaction. The Financial Adviser will provide advice to the Board -- which is independent of the advice provided by the institution or the educational building corporation - as to the anticipated effect of the proposed transaction on the institution and the entire IHL system. The Commissioner will not approve use of a financial adviser with respect to a transaction if the proposed advisor has or has had substantial other relationships with the institution to the extent that would cause its judgment or independence to be questioned by a disinterested observer. The financial advisor(s) shall meet such qualifications and perform such services as may be prescribed by the Board, and the Board will periodically approve a list of possible firms to provide those services from which the Commissioner may select when the necessity arises. Payment to the financial advisor(s) shall be made by the institution, or the institution’s educational building corporation, without regard for whether the Board approves the construction or renovation or whether the institution or educational building corporation constructs the project, or in the case of refinancing, whether the debt is refinanced. Financing Projects. Prior to Board consideration of an institution’s request to issue debt of the educational building corporation for the construction, maintenance, equipping, acquisition or renovation of facilities, the financial advisor must provide the Board with an independent Page 1 of 3   EXHIBIT 2 October 19, 2017 analysis of the institution’s financial condition, to verify that proposed revenue stream(s) are sufficient to repay the debt service and to recommend the project’s viability. If the educational building corporation will issue commercial paper, the financial advisor shall also calculate an opinion of the breakeven interest rate to long term bonds to justify the use of commercial paper. The institution shall submit the report of the financial advisor(s) and the request for a project initiation to the Board for approval. The request must state the institution’s intent, justify the need for the project and give an estimate of the total construction budget. The request must also include naming the design professionals, bond counsel and senior underwriter(s) selected by the board of the educational building corporation. Following the Board’s approval of the project initiation, the institution shall return to the Board at a subsequent meeting and present a resolution for Board approval granting permission for issuing bonds or other forms of debt obligations for the specific project. In no case shall the educational building corporation issue bonds or other forms of debt obligations without specific approval of the debt obligations from the Board for specific projects. Refinancing or Defeasing of Outstanding Debt. Outstanding debt of the educational building corporation may be refinanced in accordance with the provisions of this policy. Prior to Board consideration of an institution’s request to issue debt of the educational building corporation to refinance outstanding debt of the institution or the educational building corporation, the financial advisor must provide the Board with an independent analysis showing potential net present value (NPV) savings based on current market conditions. The institution’s request must include naming the bond counsel and senior underwriter(s) selected by the board of the educational building corporation. After consideration of the financial advisor’s analysis and other factors that the Board deems material, the Board may approve the issuance of debt by the educational building corporation, in the discretion of the authorized representatives of the educational building corporation to refinance outstanding debt of the institution or the educational building corporation, which authorization may be conditioned on the specific level of NPV savings being achieved. Refinancing or defeasing of debt does not require a subsequent meeting of the Board of Trustees provided the financial advisor has provided a report demonstrating adequate net present value savings and the bond resolution and form of bond documents have been presented to and approved by the Board. Review and Approval of Documents. In connection with the issuance of debt for any purpose, the institution shall present a resolution for Board approval granting permission for issuing bonds or other forms of debt obligations and for approval of the following documents to which the Board will be a party: the lease, the ground lease, the preliminary official statement (if required for the type of debt to be issued), and the continuing disclosure agreement (if required for the type of debt to be issued). The resolution shall also authorize representatives of the Board to execute such documents. Prior to the approval of the resolution by the Board, the educational Page 2 of 3   EXHIBIT 2 October 19, 2017 building corporation shall submit to the Board staff, for informational purposes only, the form of any documents that are to be entered into by the educational building corporation in connection with the issuance of bonds or other debt, but to which the Board is not a party. Method of Sale. Unless the Board approves otherwise, obligations shall be offered and sold through a competitive sale process or, alternatively, on a negotiated basis to an underwriter, in the case of bonds, or a dealer, in the case of commercial paper. Selection of Financial Institution Participants. Any selection of a financial institution to serve as trustee under a trust indenture, as escrow agent under an escrow agreement, or as a lender to an educational building corporation, either directly or through the purchase of obligations of the educational building corporation, shall be made by the educational building corporation in its sole discretion and shall not be subject to approval by the Board. Continuing Disclosure Obligations. Securities and Exchange Commission Rule 15c2-12 generally provides that an underwriter cannot sell governmental bonds unless an “obligated person” with respect to the bonds enters into a “Continuing Disclosure Agreement” (CDA) agrees to submit annually audited financial statements of the obligated person and other information as set forth in the CDA and notices of specified material events. With respect to the issuance of bonds by educational building corporations, the Board is an “obligated person” and the CDA will typically require audited financial statements and operating data for the entire IHL system to be submitted annually, rather than information on individual institutions. The material events specified in the CDA also typically relate to the entire IHL system. To facilitate uniformity, efficiency and timeliness in complying with the requirements of Rule 15c2-12 relating to bonds issued by an educational building corporation, the Board, rather than the educational building corporation, will enter into the CDA and undertake to provide the annual disclosures and material event notices. The Board will hire an independent agent to assist with compliance with its obligations under CDA(s), as well as, compliance by educational building corporations under CDA(s) entered into by educational building corporations prior to the adoption of this policy upon approval by the Board. The Board, and/or its dissemination agent, will also sign up for the EMMA tickler system reminders. Page 3 of 3   EXHIBIT 3 October 19, 2017   SYSTEM: REAL ESTATE ITEMS APPROVED SUBSEQUENT TO THE AUGUST 17, 2017 BOARD MEETING SUBMISSION DEADLINE NOTE: THE FOLLOWING ITEMS WERE APPROVED BY THE BOARD'S REAL ESTATE AND FACILITIES STAFF ACCORDING TO BOARD POLICY §904 (A) BOARD APPROVAL. Change Order Approval Note: No change orders approved by Board staff, as reflected within any of the following informational agenda items, increase the Board approved total project budget. The total project budget as approved by the Board provides for a contingency fund, which allows for an increase in the construction budget of between five and ten percent. Any increase in the total project budget caused by a change order, would require Board approval and could not be approved by Board staff until the budget increase is approved by the Board. ALCORN STATE UNIVERSITY 1. ASU- GS 101-297 – Technology Classroom Building NOTE: This is a Bureau of Building project Approval Request #1: Contract Documents Board staff approved Contract Documents as submitted by Allred Architectural Group Approval Status & Date: APPROVED, August 29, 2017 Approval Request #2: Advertise Board staff approved request to advertise for receipt of bids. Approval Status & Date: APPROVED, August 29, 2017 Project Initiation Date: June 20, 2013 Design Professional: Allred Architectural Group General Contractor: TBD Total Project Budget: $16,500,000.00 2. ASU- IHL 201-252 – Morris-Boykin Renovation Approval Request #1: Contract Documents Board staff approved Contract Documents as submitted by Durrell Design Group Approval Status & Date: APPROVED, August 14, 2017 Approval Request #2: Advertise Board staff approved request to advertise for receipt of bids. Approval Status & Date: APPROVED, August 14, 2017 Project Initiation Date: August 8, 2016 Design Professional: Durrell Design Group General Contractor: TBD Total Project Budget: $1,777,500.35 Page 1 of 12   EXHIBIT 3 October 19, 2017   3. ASU- IHL 201-255 – Water Treatment Facility Improvements Approval Request #1 (INTERIM): In accordance with Board Policy §904 (B) Board Approval, Interim Chair Approval was granted by Mr. Hal Parker, Chair of the Real Estate and Facilities Committee on August 24, 2017 to approve the initiation and appointment of the design professional for the Water Treatment Facility Improvements project. Approval Status & Date: APPROVED, August 24, 2017 Project Initiation Date: February 18, 2016 Design Professional: M & G Enterprises, Inc., d/b/a Engineering Service General Contractor: TBD Total Project Budget: $3,311,592.00 DELTA STATE UNIVERSITY 4. DSU– GS 102-260 – Zeigel Hall Renovation NOTE: This is a Bureau of Building project Approval Request #1: Change Order #1 Board staff approved Change Order #1 in the amount of $250,141.80 and one hundred sixteen (116) additional days to the contract of Roy Collins Construction Co., Inc. Approval is requested from the Bureau of Building, Grounds, and Real Property Management. Approval Status & Date: APPROVED, August 11, 2017 Change Order Description: Change Order #1 includes the following items: removal of existing trees; provide separate chill water valves from the existing campus loop; relocation of fiber optics; installation of a valve into the main gas line and tie into the main gas line directly and replacement of the existing gas valve; removal of asbestos containing concealed glue dots; cost associated with proposal for energy management & controls system to be deducted from the controls allowance; block the wall demo; new wall construction; and one hundred sixteen (116) days to the contract.. Change Order Justification: These changes were due to latent job site conditions; and additional days for work as indicated herein. Total Project Change Orders and Amount: One (1) change order for a total amount of $250,141.80. Project Initiation Date: October 16, 2014 Design Professional: Architecture South, Inc. General Contractor: Roy Collins Construction Co., Inc. Total Project Budget: $6,292,500.00 5. DSU– GS 102-262 – Young Maulding Renovations NOTE: This is a Bureau of Building project Approval Request #1: Award of Construction Contract Board staff approved the Award of Contract in the amount of $8,095,000.00 to the apparent low bidder, Diversified Construction Services, Inc. Approval Status & Date: APPROVED, July 18, 2017 Page 2 of 12   EXHIBIT 3 October 19, 2017   Project Initiation Date: October 16, 2014 Design Professional: Burris/Wagnon Architects, P.A. General Contractor: Diversified Construction Services, Inc. Total Project Budget: $9,180,791.00 JACKSON STATE UNIVERSITY 6. JSU– GS 103-286 – Stewart Renovation Preplan NOTE: This is a Bureau of Building project Approval Request #1: Approval of Schematic Design Documents Board staff approved the Schematic Design Documents as submitted by Foil Wyatt Architects & Planners, PLLC. Approval Status & Date: APPROVED, August 21, 2017 Approval Request #2: Design Development Documents Board staff approved the Design Development Documents as submitted by Foil Wyatt Architects & Planners, PLLC. Approval Status & Date: APPROVED, August 21, 2017 Project Initiation Date: November 17, 2016 Design Professional: Foil Wyatt Architects & Planners, PLLC General Contractor: TBD Phased Project Budget: $200,000.00 MISSISSIPPI STATE UNIVERSITY 7. MSU– GS 105-351 – YMCA Renovation NOTE: This is a Bureau of Building project Approval Request #1: Change Order #2 Board staff approved Change Order #2 in the amount of $171,879.54 and eleven (11) additional days to the contract of Gregory Construction Services, Inc. Approval Status & Date: APPROVED, August 25, 2017 Change Order Description: Change Order #2 includes the following items: roof investigation; asbestos abatement; electrical modifications; interior finish modifications; and eleven (11) days to the contract. Change Order Justification: These changes were due to latent job site conditions; and additional days for work as indicated herein. Approval Request #2: Change Order #3 Board staff approved Change Order #3 in the amount of $139,343.91 and twenty-one (21) additional days to the contract of Gregory Construction Services, Inc. Approval Status & Date: APPROVED, August 25, 2017 Change Order Description: Change Order #3 includes the following items: steam tunnel removal; electrical changes; first floor ceiling & miscellaneous interior credits; and twenty-one (21) days to the contract. Page 3 of 12   EXHIBIT 3 October 19, 2017   Change Order Justification: These changes were due to latent job site conditions; and additional days for work as indicated herein. Total Project Change Orders and Amount: Three (3) change orders for a total amount of $437,507.82. Project Initiation Date: August 15, 2013 Design Professional: Belinda Stewart Architects, P.A. General Contractor: Gregory construction Services, Inc. Total Project Budget: $9,800,000.00 8. MSU– GS 113-136 – Meat Science Laboratory NOTE: This is a Bureau of Building project Approval Request #1: Change Order #3 Board staff approved Change Order #3 in the amount of $15,219.54 and sixteen (16) additional days to the contract of Construction Services, Inc. Approval is requested from the Bureau of Building, Grounds, and Real Property Management. Approval Status & Date: APPROVED, July 21, 2017 Change Order Description: Change Order #3 includes the following items: remove six (6) backflow preventers; provide weather proof GFCI with weather proof cover; provide Patriot “chair” in lieu of Fusion; install a handrail; re-configure the fire protection and domestic water connections; and sixteen (16) days to the contract. Change Order Justification: These changes were due to errors & omissions in the plans and specifications; latent job site conditions; user/owner requested modifications; and additional days for work as indicated herein. Total Project Change Orders and Amount: Three (3) change orders for a total credit amount of $35,906.03. Project Initiation Date: October 17, 2013 Design Professional: Pryor & Morrow, P.A. General Contractor: Construction Services, Inc. Total Project Budget: $8,200,000.00 9. MSU– IHL 205-271 – Robert L. Jones Circle Road and Utility Completion Approval Request #1: Change Order #1 Board staff approved Change Order #1 in the amount of $9,090.75 and one hundred eighty-five (185) additional days to the contract of Mitchell Contracting, Inc. Approval Status & Date: APPROVED, July 7, 2017 Change Order Description: Change Order #1 includes the following items: add an out flume; add striping; add a sewer manhole extension; add a concrete flume and riprap to the west end of the project; to raise a sewer manhole in the southeast portion of the project; add traffic striping; and one hundred eight-five (185) days to the contract due to weather delays. Change Order Justification: These changes were due to latent job site conditions; user/owner requested modifications; and additional days for work as indicated herein. Total Project Change Orders and Amount: One (1) change order for a total amount of $9,090.75. Project Initiation Date: October 17, 2013 Page 4 of 12   EXHIBIT 3 October 19, 2017   Design Professional: Pritchard Engineering General Contractor: Mitchell Contracting, Inc. Total Project Budget: $1,260,315.00 10. MSU– IHL 205-278 – MSU nSPARC Data Center Approval Request #1: Change Order #3 Board staff approved Change Order #3 in the amount of $23,661.17 and fourteen (14) additional days to the contract of Burks-Mordecai Builders, Inc. Approval Status & Date: APPROVED, August 2, 2017 Change Order Description: Change Order #3 includes the following items: re-routing site fiber; added a solid panel door; installed window shades in an office; add a raised laminate floor; changes to electrical and low voltage; add a card access to a door; add a grounding system to the computer room; and fourteen (14) days to the contract. Change Order Justification: These changes were due to latent job site conditions; user/owner requested modifications; and days for work as indicated herein. Total Project Change Orders and Amount: Three (3) change orders for a total amount of $238,222.88. Project Initiation Date: November 20, 2014 Design Professional: Dale Partners Architects, P.A. General Contractor: Burks-Modecai Builders, Inc. Total Project Budget: $4,650,000.00 11. MSU– IHL 205-279 – Addition & Renovation to Dudy Noble Field Approval Request #1: Change Order #1 Board staff approved Change Order #1 in the credit amount of $469,800.00 and zero (0) additional days to the contract of Jesco, Inc. Approval Status & Date: APPROVED, August 9, 2017 Change Order Description: Change Order #1 includes the following items: insulation spec revision from ½” to 1” on chill water piping; delete roof drain where exposed to ambient temperatures; to apply 1” armaflex on heating water equipment in lieu of 3” fiberglass; change the outfield lounge rails from steel to aluminum; increase the mesh opening to 4”; to use Timber Tech composite decking in lieu of Trex decking at the outfield lounges; change out the existing two gas water heaters for Tricon water heaters; change out the existing water heater for the center field build and install a Rhee water heater; delete all domestic cold and hot water insulation on branch lines; change the domestic cold and hot recirculation pipe size 2” and below to PEX 8; omit the requirement for PVC coated galvanized steel elbow for underground 90’s; and omit the requirement for fire wrap. Change Order Justification: These changes were due to user/owner requested modifications. Total Project Change Orders and Amount: One (1) change order for a total credit amount of $469,800.00. Project Initiation Date: May 21, 2015 Design Professional: Wier Boerner Allin Architects, PLLC General Contractor: Jesco, Inc. Page 5 of 12   EXHIBIT 3 October 19, 2017   Total Project Budget: $55,000,000.00 12. MSU - Demolition of Building #1132 Approval Request #1 (INTERIM): In accordance with Board Policy §904 (B) Board Approval, Interim Chair Approval was granted by Mr. Hal Parker, Chair of the Real Estate and Facilities Committee on July 26, 2017 to approve the removal from inventory and demolition of the existing small garage/storage building (Building #1132). Approval Status & Date: APPROVED, July 26, 2017 MISSISSIPPI UNIVERSITY FOR WOMEN 13. MUW- GS 104-187 – Turner Hall (Demonstration School) Renovation NOTE: This is a Bureau of Building project Approval Request #1: Contract Documents Board staff approved Contract Documents as submitted by Durrell Design Group Approval Status & Date: APPROVED, August 14, 2017 Approval Request #2: Advertise Board staff approved request to advertise for receipt of bids. Approval Status & Date: APPROVED, August 14, 2017 Project Initiation Date: August 8, 2016 Design Professional: Durrell Design Group General Contractor: TBD Total Project Budget: $1,777,500.35 14. MUW – Memorandum of Agreement between MUW and the Mississippi Department of Archives and History (MDAH) The Mississippi Archives and History (MDAH) Board of Trustees, MDAH staff, and Mississippi University for Women have agreed to a Memorandum of Agreement (MOA) that addresses the designation of three (3) new historical landmark buildings, thirteen (13) potential historical landmark buildings, and eleven (11) ineligible buildings for historical landmark designation on the MUW campus during a five (5) year time period beginning September 26, 2017 and ending September 26, 2022. At the end of the five (5) year time period, the MOA will be reassessed by MDAH and MUW. A copy of the MOA that details the designation of each building will be kept on file with the Office of Real Estate and Facilities at IHL. UNIVERSITY OF MISSISSIPPI 15. UM– IHL 107-308 – Union Addition & Renovation NOTE: This is a Bureau of Building project Approval Request #1: Change Order #8 Board staff approved Change Order #8 in the amount of $461,754.00 and sixty-five (65) additional days to the contract of Roy Anderson Corporation. Page 6 of 12   EXHIBIT 3 October 19, 2017   Approval Status & Date: APPROVED, July 14, 2017 Change Order Description: Change Order #8 includes the following items: removal and disposal of undocumented asbestos-contaminated material; add new water lines with Insterta-Valves; remove existing undocumented water lines and hydro-jet to locate other existing utilities to remain for construction of the new south porch; add an air handling unit with associated components including controls and painting at one of the buildings; add miscellaneous steel framing, plating & grating for floor openings & a sprinkler system at mechanical platforms; change the flooring in McAlister’s back-of-house kitchen areas from tile to fluid-applied flooring to match the rest of the kitchens; change the material of overhead doors at the loading dock from painted steel to stainless steel and add sensing edge slack retraction safety features at the food brand security grilles; add crack suppression membrane under the terrazzo flooring at the light-weight concrete floor slabs; and sixty-five (65) days to the contract. Change Order Justification: This change was due to errors and omissions in the plans and specifications; latent jobsite conditions; user/owner requested modifications; and days for work as indicated herein. Total Project Change Orders and Amount: Eight (8) change orders for a total amount of $1,369,865.00. Project Initiation Date: August 18, 2011 Design Professional: Eley Guild Hardy Architects – Jackson, P.A. General Contractor: Roy Anderson Corporation Phased Project Budget: $58,580,565.32 Total Project budget: $58,900,000.00 16. UM – IHL 207-376.2R – STEM Building – Site Utilities Relocation REBID Approval Request #1: Change Order #1 Board staff approved Change Order #1 in the amount of $485,148.07 and sixty (60) additional days to the contract of Eubank Construction Co., Inc. Approval Status & Date: APPROVED, July 7, 2017 Change Order Description: Change Order #1 includes the following items: additional hot and cold water valves; extend the electrical bore; additional water lines added to the new waterline to Faser Hall; excavation to abandon two (2) existing water well casings discovered during construction; additional construction fencing; relocation of a communications manhole into the sidewalk; storm drainage modifications; sanitary sewer line repair; additional bores and wire; an additional post indicator valve for a fire protection line; add 1200 amp outdoor disconnect and relocate the underground feeder; raise the manhole tops to match the existing grade; installation of a domestic water service connection; relocation of a domestic water line; additional boring for the water line installation; replace two (2) manholes and a gravity sewer line on the north end of the new line; install electrical conduit for future use; and sixty (60) days to the contract. Change Order Justification: These changes were due to errors and omissions in the plan & specifications; latent job site conditions; user/owner requested modifications; and days for work as indicated herein. Total Project Change Orders and Amount: One (1) change order for a total amount of $485,148.07. Page 7 of 12   EXHIBIT 3 October 19, 2017   Project Initiation Date: January 16, 2014 Design Professional: McCarty Architects, P.A. General Contractor: Eubank Construction Co., Inc. Phased Project Budget: $6,689,259.40 Total Project Budget: $14,000,000.00 17. UM– IHL 207-389 – Vaught-Hemingway Stadium North End Zone Approval Request #1: Change Order #11 Board staff approved Change Order #11 in the credit amount of $78,043.00 and zero (0) additional days to the contract of Roy Anderson Corporation. Approval Status & Date: APPROVED, July 6, 2017 Change Order Description: Change Order #11 includes the following items: Credit due to silt and fiber damage. Change Order Justification: These changes were due to errors and omissions in the plans and specifications; latent job site conditions; and user/owner requested modifications. Total Project Change Orders and Amount: Eleven (11) change orders for a total amount of $2,524,973.28. Project Initiation Date: August 21, 2014 Design Professional: AECOM General Contractor: Roy Anderson Corporation Total Project Budget: $30,593,713.00 18. UM – IHL 207-401 – Wastewater Treatment Facility Expansion Approval Request #1: Change Order #5 Board staff approved Change Order #5 in the amount of $55,269.11 and eleven (11) additional days to the contract of Hemphill Construction Company, Inc. Approval Status & Date: APPROVED, July 21, 2017 Change Order Description: Change Order #5 includes the following items: labor & material to pipe from clarifier to sludge drain; to extend electrical service for the new decant lift station; changes in the design of the cascade aerator structure; to fill the old degritter and headworks channel and cap with concrete in lieu of grating; change the type of vent louver in the headworks building from fixed to operable with associated electrical work; to locate and re-route unmarked water lines; to install additional probes & controllers and provide circuits to those locations; to modify a rotor access platform; and eleven (11) days to the contract due to weather delays. Change Order Justification: These changes are due to errors and omissions in the plans and specifications; latent jobsite conditions; user/owner requested modifications; and days for work as indicated herein. Total Project Change Orders and Amount: Five (5) change orders for a total amount of $121,747.04. Project Initiation Date: February 18, 2015 Design Professional: Engineering Solutions, Inc. General Contractor: Hemphill Construction Company, Inc. Total Project Budget: $9,900,000.00 Page 8 of 12   EXHIBIT 3 October 19, 2017   19. UM – IHL 207-436 – Kinard Water Treatment Replacement Approval Request #1: Approval of Schematic Design Documents Board staff approved the Schematic Design Documents as submitted by Engineering Solutions, Inc. Approval Status & Date: APPROVED, August 16, 2017 Approval Request #2: Waiver of Design Development Documents Board staff approved the Waiver of Design Development Documents as submitted by Engineering Solutions, Inc. Approval Status & Date: APPROVED, August 16, 2017 Project Initiation Date: June 15, 2017 Design Professional: Engineering solutions, Inc. General Contractor: TBD Total Project Budget: $1,100,000.00 UNIVERSITY OF MISSISSIPPI MEDICAL CENTER 20. UMMC– IHL 209-544 – Translational Research Center Approval Request #1: Change Order #6 Board staff approved Change Order #6 in the amount of $57,867.53 and forty-one (41) additional days to the contract of Fountain Construction Company, Inc. Approval Status & Date: APPROVED, July 27, 2017 Change Order Description: Change Order #6 includes the following items: added paint scope at various basement rooms; add five (5) pipe bollards at the fuel tank; add a quazite enclosure to raise the existing medium voltage pull box at south drive; add removable caps at the animal holding rooms; install lab sinks in millwork at the 1st floor area; relocate stair vestibule smoke detectors at all floors; add a generator Float; install air flow switches and high humidity duct-mounted devices on six (6) air handling units; add a transformer for the interconnection between the emergency generator and the temporary generator docking station; install gypsum board at two (2) floor service elevator vestibules; add a fire damper at the 4th floor where wet labs are located; add a duct detector at one air handling unit; add electrical for an instant hot water heater for two (2) sterilizers in the surgery suite; and forty-one (41) days to the contract due to weather delays. Change Order Justification: These changes are due to errors and omissions in the plans & specifications; latent job site conditions; user/owner requested modifications and weather delays for work as indicated herein. Total Project Change Orders and Amount: Six (6) change orders for a total credit amount of $609,616.70 Project Initiation Date: November 17, 2011 Design Professional: Foil Wyatt Architects & Planners, PLLC General Contractor: Fountain Construction Company, Inc. Phased Project Budget: $44,259,496.98 Total Project Budget: $50,572,743.00 Page 9 of 12   EXHIBIT 3 October 19, 2017   21. UMMC – IHL 209-557 – Med-Com/PES Renovations Approval Request #1: Approval of Schematic Design Documents Board staff approved the Schematic Design Documents as submitted by Canizaro Cawthon Davis. Approval Status & Date: APPROVED, July 27, 2017 Project Initiation Date: June 16, 2017 Design Professional: Canizaro Cawthon Davis General Contractor: TBD Total Project Budget: $2,868,925.00 UNIVERSITY OF SOUTHERN MISSISSIPPI 22. USM– GS 108-279 – Lucas Administration Envelope Repairs NOTE: This is a Bureau of Building project Approval Request #1: Change Order #3 Board staff approved Change Order #3 in the amount of $7,705.00 and zero (0) additional days to the contract of Finlo Construction Company, Inc. Approval is requested from the Bureau of Building, Grounds, and Real Property Management. Approval Status & Date: APPROVED, July 21, 2017 Change Order Description: Change Order #3 includes the following items: replace corroded cast iron pipe with PVC pipe at two (2) locations on the roof drains. Change Order Justification: This change is due to existing cast iron pipes that have deteriorated and are corroded. Total Project Change Orders and Amount: Three (3) change orders for a total credit amount of $112,935.00. Project Initiation Date: March 21, 2013 Design Professional: Albert & Associates Architects, P.A. General Contractor: Finlo Construction Company, Inc. Total Project Budget: $3,300,000.00 23. USM– GS 108-281 – Joseph Greene Hall Renovations NOTE: This is a Bureau of Building project Approval Request #1: Award of Construction Contract Board staff approved the Award of Contract in the amount of $10,350,000.00 to the apparent low bidder, B. W. Sullivan Building Contractor, Inc. Approval Status & Date: APPROVED, August 29, 2017 Project Initiation Date: September 18, 2014 Design Professional: Allred Architectural Group General Contractor: B. W. Sullivan Building Contractor, Inc. Total Project Budget: $13,000,000.00 Page 10 of 12   EXHIBIT 3 October 19, 2017   24. USM– IHL 210-243 – Marine Education Center Approval Request #1: Change Order #5 Board staff approved Change Order #5 in the amount of $99,170.00 and thirteen (13) additional days to the contract of Starks Contracting Co., Inc. Approval Status & Date: APPROVED, August 2, 2017 Change Order Description: Change Order #5 includes the following items: installation of a security camera and code blue rough-ins; additional communication fiber and wire to connect two buildings to the main hub in the visitors center; provide certified tested storefront door hardware on a building; relocate electrical transformers in two buildings; to replace a single wall exposed insulated duct with double wall insulated spiral duct in three buildings; additional communications fiber infrastructure; and thirteen (13) days to the contract. Change Order Justification: This change is due to changes in requirements or recommendation by governmental agencies; user/owner requested modifications; and days for work as indicated herein. Total Project Change Orders and Amount: Five (5) change orders for a total amount of $270,926.75. Project Initiation Date: August 21, 2008 Design Professional: Lake Flato General Contractor: Starks Contracting Co., Inc. Total Project Budget: $16,115,659.75 EDUCATION AND RESEARCH CENTER 25. ERC– GS 111-052 – Structural & Subsurface Repair NOTE: This is a Bureau of Building project Approval Request #1: Change Order #4 Board staff approved Change Order #4 in the amount of $230,975.00 and one hundred sixteen (116) additional days to the contract of Gregory Construction Services. Approval Status & Date: APPROVED, August 31, 2017 Change Order Description: Change Order #4 includes the following items: removal of unsuitable soils & provide new backfill and lime stabilization to the north access drive; fire main relocation, additional parking, removal of north parking lot sidewalks & relocated electrical service at the north parking lot; seal the crawl space opening in the foundation wall, backfill the area, construct a new sidewalk to tie into the existing sidewalk, & asphalt paving replacement in the affected area at the crawl space access; delete seven (7) planters in the east and west plaza; delete eleven (11) trees for the planters; delete the irrigation lines to the planters; and twenty-one (21) days to the contract. Change Order Justification: These changes are due to latent job site conditions; user/owner requested modifications; and additional days for work due to weather delays as indicated herein. Total Project Change Orders and Amount: Three (3) change orders for a total amount of $500,983.50. Page 11 of 12   EXHIBIT 3 October 19, 2017   Project Initiation Date: August 21, 2008 Design Professional: JBHM General Contractor: Gregory Construction Services Total Project Budget: $4,178,570.87 Page 12 of 12   EXHIBIT 4 October 19, 2017 SYSTEM - REPORT OF PAYMENTS TO OUTSIDE COUNSEL Legal fees approved for payment to outside counsel in relation to litigation and other matters: Payment of legal fees for professional services rendered by Baker & Hostetler (statement dated 8/28/17) from the funds of Alcorn State University. (This statement, in the amount of $833.50, represents services and expenses in connection with general legal advice.) TOTAL DUE……………………………….…….………………$ 833.50 Payment of legal fees for professional services rendered by Ware Immigration (statements dated 8/1/17 and 8/9/17) from the funds of Alcorn State University. (These statements, in the amounts of $1,000.00 and $2,435.00, respectively, represent services and expenses in connection with immigration/labor certification.) TOTAL DUE……………………………….…….………………$ 3,435.00 Payment of legal fees for professional services rendered by Brunini, PLLC (statements dated 7/25/17 and 8/21/17) from the funds of Mississippi State University. (These statements, in the amounts of $4,200.00 and $50.00, respectively, represent services and expenses in connection with general legal advice.) TOTAL DUE……………………………….…….………………$ 4,250.00 Payment of legal fees for professional services rendered by Butler Snow (statement dated 8/11/17) from the funds of Mississippi State University. (This statement, in the amount of $9,888.00, represents services and expenses in connection with general legal advice.) TOTAL DUE……………………………….…….………………$ 9,888.00 Payment of legal fees for professional services rendered by Ware Immigration (statement dated 8/1/17) from the funds of Mississippi State University. (This statement, in the amount of $500.00, represents services and expenses in connection with immigration/labor certification.) TOTAL DUE……………………………….…….………………$ 500.00 Payment of legal fees for professional services rendered by Butler Snow (statement dated 8/11/17) from the funds of the University of Mississippi. (This statement, in the amount of $1,475.00, represents services and expenses in connection with general legal advice.) TOTAL DUE……………………………….…….………………$ Page 1 of 6 1,475.00 EXHIBIT 4 October 19, 2017 Payment of legal fees for professional services rendered by Mayo Mallette (statements dated 8/7/17 and 9/8/17) from the funds of the University of Mississippi. (These statements, in the amounts of $3,071.50 and $7,662.00, respectively, represent services and expenses in connection with general legal advice.) TOTAL DUE……………………………….…….………………$ 10,733.50 Payment of legal fees for professional services rendered by Ware Immigration (statements dated 8/1/17, 8/1/17, 9/1/17, 9/1/17, 9/1/17 and 9/1/17) from the funds of the University of Mississippi. (These statements, in the amounts of $500.00, $24.64, $24.68, $47.26, $80.00 and $30.05, respectively, represent services and expenses in connection with immigration/labor certification.) TOTAL DUE……………………………….…….………………$ 706.63 Payment of legal fees for professional services rendered by Bradley Arant (statements dated 6/23/17, 8/7/17, 8/7/17 and 8/7/17) from the funds of the University of Mississippi Medical Center. (These statements, in the amounts of $6,177.88, $245.00, $4,195.30 and $3,260.20, respectively, represent services and expenses in connection with general legal advice.) TOTAL DUE……………………………….…….………………$ 13,878.38 Payment of legal fees for professional services rendered by Butler Snow (statements dated 7/12/17, 7/13/17, 7/13/17, 7/13/17, 7/13/17, 7/17/17, 7/17/17, 7/20/17, 7/24/17, 8/4/17, 8/10/17, 8/11/17, 8/15/17, 8/15/17, 8/15/17 and 8/17/17) from the funds of the University of Mississippi Medical Center. (These statements, in the amounts of $122.50, $1,349.40, $10,048.00, $1,176.00, $343.00, $60.10, $2,548.00, $1,886.50, $8,302.50, $42,755.75, $23,189.81, $10,782.82, $9,972.60, $1,386.50, $88.50 and $6,287.70, respectively, represent services and expenses in connection with legal advice.) TOTAL DUE……………………………….…….………………$ 120,299.68 Payment of legal fees for professional services rendered by Hogan Lovells (statements dated 7/31/17 and 8/22/17) from the funds of the University of Mississippi Medical Center. (These statements, in the amounts of $17,422.50 and $7,312.70, respectively, represent services and expenses in connection with legal advice.) TOTAL DUE……………………………….…….………………$ 24,735.20 Payment of legal fees for professional services rendered by Hood Bolen (statement dated 8/8/17) from the funds of the University of Mississippi Medical Center. (This statement, in the amount of $1,155.00, represents services and expenses in connection with legal advice.) TOTAL DUE……………………………….…….………………$ Page 2 of 6 1,155.00 EXHIBIT 4 October 19, 2017 Payment of legal fees for professional services rendered by Jones Walker (statement dated 8/2/17) from the funds of the University of Mississippi Medical Center. (This statement, in the amount of $90.00, represents services and expenses in connection with legal advice.) TOTAL DUE……………………………….…….………………$ 90.00 Payment of legal fees for professional services rendered by Watkins & Eager (statements dated 5/1/17, 5/16/17, 7/13/17, 8/29/17, 8/29/17, 8/29/17, 8/29/17 and 8/29/17) from the funds of the University of Mississippi Medical Center. (These statements, in the amounts of $610.50, $123.75, $6,398.99, $297.00, $511.50, $222.75, $297.00 and $12,688.50, respectively, represent services and expenses in connection with legal advice.) TOTAL DUE……………………………….…….………………$ 21,149.99 Payment of legal fees for professional services rendered by Whitfield Law Group (statements dated 6/26/17, 7/5/17, 7/5/17, 7/6/17, 7/6/17, 7/6/17, 8/4/17, 8/4/17, 8/4/17, 8/4/17, 8/4/17, 8/4/17 and 8/9/17) from the funds of the University of Mississippi Medical Center. (These statements, in the amounts of $1,359.00, $2,901.45, $973.00, $8,032.20, $6,313.20, $5,299.10, $4,781.70, $5,910.20, $2,139.50, $10,939.86, $2,070.00, $700.00 and $4,817.82, respectively, represent services and expenses in connection with legal advice.) TOTAL DUE……………………………….…….………………$ 56,237.33 Payment of legal fees for professional services rendered by Bryan, Nelson, Schroeder, Castigliola & Banahan (statement dated 9/7/17) from the funds of the University of Southern Mississippi. (This statement, in the amount of $11,485.50, represents services and expenses in connection with general legal advice.) TOTAL DUE……………………………….…….………………$ 11,485.50 Payment of legal fees for professional services rendered by Butler Snow (statements dated 2/3/17, 7/6/17, 7/7/17, 7/24/17, 7/24/17, 8/8/17, 8/8/17, 8/10/17, 8/11/17 and 9/7/17) from the funds of the University of Southern Mississippi. (These statements, in the amounts of $552.00, $48.00, $1,397.65, $925.00, $2,112.00, $72.00, $1,327.50, $3,451.50, $816.00 and $955.50, respectively, represent services and expenses in connection with general legal advice.) TOTAL DUE……………………………….…….………………$ 10,732.15 Payment of legal fees for professional services rendered by Ware Immigration (statements dated 8/1/17, 8/1/17, 8/1/17, 8/1/17, 8/1/17, 9/1/17, 9/1/17 and 9/1/17) from the funds of the University of Southern Mississippi. (These statements, in the amounts of $287.50, $8.61, $49.63, $47.10, $8.61, $1,500.00, $3,000.00 and $2,500.00, respectively, represent services and expenses in connection with immigration/labor certifications.) TOTAL DUE……………………………….…….………………$ Page 3 of 6 7,401.45 EXHIBIT 4 October 19, 2017 Legal fees approved for payment to outside counsel in relation to patent and other matters: Payment of legal fees for professional services rendered by Butler Snow (statements dated 6/29/17, 6/29/17, 6/29/17, 6/29/17, 7/21/17 and 7/24/17) from the funds of Mississippi State University. (These statements represent services and expenses in connection with the following patents: “Micro-Fluidic Device for Measuring Osmotic Second Virial Coefficients” - $3,728.50; “Live Attenuated Catfish Vaccine and Method of Making” - $2,371.50; “Live Attenuated Catfish Vaccine and Method of Making” - $335.00; “Occidiofungin Patent Applications” - $65.00; “Cancer Therapeutic Use of Occidiofungin” - $5,315.89 and “Live Attenuated Edwardsiella Ictaluri Vaccine and Method of Using Same” - $1,416.00, respectively.) TOTAL DUE……………………………….…….………………$ 9,881.89 Payment of legal fees for professional services rendered by Mendelsohn Dunleavy (statements dated 5/10/17 and 5/22/17) from the funds of Mississippi State University. (These statements represent services and expenses in connection with the following patents: “Engineering of the Production of a Conformational Variant of Occidiofungin that has Enhanced Inhibitory Activity against Fungal Species” - $1,998.75 and “Occidiofungin, A Unique Antifungal Glycopeptide Produced by a Strain of Burkholderia Contaminans” - $2,616.25, respectively.) TOTAL DUE……………………………….…….………………$ 4,615.00 Payment of legal fees for professional services rendered by Stites & Harbison (statements dated 7/24/17, 7/25/17 and 8/25/17) from the funds of Mississippi State University. (These statements represent services and expenses in connection with the following patents: “Methods of Synthesizing Graphene from a Lignin Source” - $285.00; “Novel Catalysts and Process for Liquid Hydrocarbon Fuel Production” - $2,176.00 and “Novel Catalysts and Process for Liquid Hydrocarbon Fuel Production” - $575.90, respectively.) TOTAL DUE……………………………….…….………………$ 3,036.90 Payment of legal fees for professional services rendered by Armstrong Teasdale (statements dated 5/19/17, 7/11/17, 7/11/17, 8/23/17 and 8/23/17) from the funds of the University of Mississippi. (These statements represent services and expenses in connection with the following patents: “Systems and Methods for Detecting Transient Acoustic Signals” - $87.64; “Microphone Array for Reducing the Effect of Atmospheric Turbulence” - $1,319.22; “Microphone Array for Reducing the Effect of Atmospheric Turbulence” - $1,109.06; “Systems and Methods for Detecting Transient Acoustic Signals” - $40.00 and “Systems and Methods for Detecting Transient Acoustic Signals” - $406.00, respectively.) TOTAL DUE……………………………….…….………………$ Page 4 of 6 2,961.92 EXHIBIT 4 October 19, 2017 Payment of legal fees for professional services rendered by Butler Snow (statements dated 5/19/17, 7/18/17 and 8/30/17) from the funds of the University of Mississippi. (These statements represent services and expenses in connection with the following patents: “Cache Mapping Technology Matter” - $2,728.50; “Cache Mapping Technology Matter” - $2,008.50 and “Cache Mapping Technology Matter” - $1,360.50, respectively.) TOTAL DUE……………………………….…….………………$ 6,097.50 Payment of legal fees for professional services rendered by Hershkovitz & Associates (statements dated 5/1/17, 5/18/17, 7/18/17, 7/20/17, 8/8/17, 8/8/17, 8/9/17, 8/9/17, 8/9/17, 8/10/17, 8/15/17, 8/15/17, 8/16/17, 8/17/17, 8/20/17, 8/23/17 and 8/23/17) from the funds of the University of Mississippi. (These statements represent services and expenses in connection with the following patents: “Cannabidiol Prodrugs with Improved Ocular Bioavailability” $1,541.75; “Compositions Containing Delta-9-THC-Amino Acid Esters” - $1,881.50; “Potent Immunostimulants from Microalgae” - $820.00; “Potent Immunostimulants from Microalgae” $1,110.00; “Potent Immunostimulants from Microalgae” - $1,568.04; “Potent Immunostimulants from Microalgae” - $1,452.40; “Potent Immunostimulants from Microalgae” - $1,233.76; “Potent Immunostimulants from Microalgae” - $1,811.80; “Potent Immunostimulants from Microalgae” - $1,184.22; “Highly Selective Sigma Receptor Radioligands” - $150.00; “Potent Immunostimulants from Microalgae” - $2,264.51; “Potent Immunostimulants from Microalgae” - $1,315.06; “Potent Immunostimulants from Microalgae” - $2,010.00; “Potent Immunostimulants from Microalgae” - $1,049.79; “Compositions Containing Delta-9-THC Amino Acid Esters” - $4,670.00; “Potent Immunostimulants from Microalgae” - $1,126.79 and “Potent Immunostimulants from Microalgae” - $1,871.25, respectively.) TOTAL DUE……………………………….…….………………$ 27,060.87 Payment of legal fees for professional services rendered by Stites & Harbison (statements dated 5/17/17, 5/17/17, 7/25/17, 7/25/17, 7/25/17, 8/24/17, 8/24/17, 8/24/17, 8/24/17 and 8/24/17) from the funds of the University of Mississippi. (These statements represent services and expenses in connection with the following patents: “Method of Detecting Humans” - $550.50; “Gas Separating Membranes” - $40.00; “Stabilized Formulation of Triamcinolone Acetonide” $1,216.00; “Use of Trans-Gnetin H or Extracts Containing Genetic H” - $2,378.00; “High Photovoltage per Area by Sequential Series Tandem (SST)” - $5,000.00; “Stabilized Formulation of Triamcinolone Acetonide” - $360.00; “Stabilized Formulation of Triamcinolone Acetonide” - $1,061.50; “Longitudinal Gait Velocity Monitoring of Older Population” - $28.50; “High Photovoltage per Area by Sequential Series Tandem (SS)” - $234.50 and “Use of Transgnetin H or Extracts Containing Genetic H” - $748.00, respectively.) TOTAL DUE……………………………….…….………………$ Page 5 of 6 7,432.50 EXHIBIT 4 October 19, 2017 Payment of legal fees for professional services rendered by Stites & Harbison (statements dated 7/24/17, 7/24/17, 7/24/17, 7/24/17, 7/25/17, 7/25/17, 7/25/17, 7/25/17, 7/25/17, 8/23/17, 8/23/17, 8/23/17, 8/23/17, 8/23/17 and 8/24/17) from the funds of the University of Mississippi Medical Center. (These statements, in the amounts of $47.50, $85.50, $133.00, $332.50, $416.00, $5,274.50, $2,008.00, $295.00, $397.50, $5,317.53, $38.00, $575.00, $755.00, $38.00 and $4,138.31, respectively, represent services and expenses in connection with intellectual property patents.) TOTAL DUE……………………………….…….………………$ Page 6 of 6 19,851.34