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DHS used state funds instead of available federal TANF money for nonprofit grants


Natalie Allison, Nashville TennesseanPublished 9:00 p.m. CT Dec. 15, 2019 | Updated 6:21 a.m. CT Dec. 16, 2019


While the Tennessee Department of Human Services touted a grant program for nonprofits as a key to spending a federal block grant to help the working poor, the agency largely funded the initiative with state dollars.

Amid scrutiny over amassing $732 million in unused Temporary Assistance for Needy Families funds, DHS has pointed to its "2Gen" grant program as an important means of putting TANF dollars to use.

But an analysis by The Tennessean shows that just over a third of the 2Gen grants were funded using federal dollars.

Of the $33.5 million awarded to nonprofits between fiscal years 2015 and 2023 — the latest date of any pending contract — just $12.1 million was paid for with federal money, according to contracts provided by DHS.

The Tennessean reviewed all signed contracts for DHS's 2Gen program, which awards grants to nonprofits around the state and is a reference to a "two generation" approach to assisting families.

In response to a question about why DHS is using state money for a program that could be funded by the growing TANF reserve, a department spokesman said the agency as of Oct. 1 will now only use federal funds for the grants.

"We determined that moving forward it made better financial sense to use 100% federal dollars in those grant payments and no longer utilize state dollars," said spokesman Sky Arnold, adding that DHS has been reevaluating "the percentage of state vs. federal dollars" it has been using to award the grants.

Rep. Robin Smith, R-Hixson, was surprised to hear about the use of state funds for the nonprofit grants.

"If a department has been running programs that could have been using federal monies allocated for said purpose and yet they've been using state dollars, I'm not saying it was inappropriate, I'm just saying it was unnecessary," said Smith, who is on a legislative working group tasked with exploring changes to the TANF program.

DHS now will receive legislative input on which nonprofits are funded

Prospective grantees for the 2Gen program apply to DHS for the funds, and the department determines which organizations are awarded money.

The legislature's joint fiscal review committee does not have oversight on which organizations receive funding, even though the majority of contracts are paid for with state money.

“In the past, DHS alone determined which organizations would receive grants through the TANF program," said Adam Kleinheider, spokesman for Lt. Gov. Randy McNally. "Going forward the working group appointed by the two speakers will have input as to how those grants are allocated.”

Barnes will address legislators at the working group's meeting Tuesday. Rep. David Hawk, R-Greeneville said he expects a conversation about what accountability measures are in place now on how DHS spends the block grant funds.

"If we don’t get a good answer about oversight, then it may be we need to bring the spending of these dollars under greater scrutiny by the legislature," Hawk said.

"In my mind, it's very important that we have an audit of the programs underneath DHS, especially that are receiving these TANF funds. Not only because it has been in the media, but because it’s the right thing to do."

Sen. Steve Dickerson, R-Nashville, said he also is interested in the working group bolstering oversight requirements for DHS's use of TANF funds, particularly when it comes to which organizations receive the grants. 

"I would have misgivings if this money were spent unilaterally without some oversight mechanism in place," Dickerson said. "This is a lot of money, it's public money, and we need to have an ongoing transparent process by which this money is spread among a number of different groups.

"This is incumbent upon us as public servants to make sure there is a transparent and very fair process to spend it."


Only two 2Gen grants have not used state money


In its initial response to questions from The Tennessean, DHS officials said the agency has awarded $67 million in 2Gen grants. But when The Tennessean reviewed the contracts, the actual total is less than half that amount, at $33 million.

Arnold said DHS qwas unable to respond to a request Friday afternoon for an explanation on the discrepancy. Barnes also cited the $67 million figure in an op-ed in The Tennessean last month.

DHS awarded the most 2Gen grants last fiscal year, doling out $10.2 million to organizations that year, according to contracts provided by the department.

That number dropped to $9.3 million in the current fiscal year. Currently, $5 million in 2Gen contracts are awarded for next fiscal year.

Organizations must meet specific requirements and goals and provide regular reports to DHS to be eligible for the funding.

Of the 30 organizations that have received 2Gen grants, only two were exclusively funded using federal dollars.

In 2017, Project Return received a one-time $42,000 grant in which no state money was issued.

This year, The Tennessee Department of Mental Health and Substance Abuse Services — the only instance of a fellow state department receiving a 2Gen grant — got a $1.6 million three-year contract exclusively paid for with federal money.

Arnold said the mental health department grant is for the agency's Therapeutic Intervention, Education, and Skills Program that provides preventative services for children at risk of being put in out of home placement.


Reach Natalie Allison at nallison@tennessean.com. Follow her on Twitter at @natalie_allison.

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