August 21, 2000
Patricia Harris-Morehead
(615) 313-4707 or (901) 543-7351


MEMPHIS--The Tennessee Department of Human Services (DHS) today terminated its child care broker contract with Cherokee Children and Family Services. State Human Services Commissioner Natasha Metcalf made the announcement at a Memphis news conference. Effective September 25, DHS will operate the child care subsidy program in Shelby County.

The department also terminated Child and Adult Care Food Program (CACFP) contracts with Cherokee Children's Nutrition, Inc. and Ashanti Services, Inc. These Memphis agencies serve as two of the local sponsors of the federally funded meal reimbursement program.

"We are here in Memphis to reassure the families, children, and providers who participate in these programs that child care benefits will not be affected by the action we are taking today, nor do we anticipate an interruption in the payments to providers. DHS is committed to providing good customer service, and we plan to work closely with Cherokee during the 30-day interim period to ensure a smooth transition," Metcalf said.

"We have put together a very knowledgeable team of people who can operate the subsidy program in Shelby County."

The state's child care subsidy program provides payments for the children of Families First participants, former participants receiving transitional child care, and low-income families who meet certain eligibility guidelines. DHS has contracts with 12 agencies across the state that serve as child care brokers. The broker agencies help families with their child care arrangements. Cherokee Children & Family Services is the broker agency that provides these services in Shelby County.

As CACFP sponsors, Cherokee's and Ashanti's contract responsibilities are to recruit local child care centers and homes, prepare monthly meal reimbursement claims, oversee the food service operations of the homes and centers and pay them to provide the meals to low-income children. Sponsoring agencies are paid based on federal reimbursement rates for homes, and a percentage of meal payments for centers. In the Memphis area, Cherokee sponsors 89 homes and centers, and Ashanti sponsors 70.

To address possible concerns about the decision to terminate the Cherokee broker contract, DHS mailed letters to approximately 12,000 local parents, providers, and others explaining the change. The department also designated and extended the hours of operation for two special toll free helplines for questions from parents and providers. The helpline number for parents is 1 800 364-1603. The number for providers is 1 800 362-8004. The hours of operation for both helplines are from 7:30 a.m. to 5:30 p.m.

In addition, DHS has scheduled meetings with local providers to discuss the change in broker services and to discuss the new subsidy rates that will go into effect in October.

And, later today, DHS Child and Adult Food Program staff will meet with the affected providers in that program. It is anticipated other local sponsors will become sponsors for many of the home providers. The affected centers can continue to participate in the program through direct contracts with DHS. (See attached for more information).

Cherokee must cease broker operations 30 days from the date of a DHS termination letter that was delivered this morning. Its CACFP operations must cease immediately.

At the news conference, Metcalf reminded reporters that the department announced in the spring its plans to administer the subsidy program statewide after all of the broker contracts expired. She also said the state has an option to terminate most state contracts for convenience or cause.

"There is a standard language clause in all of the broker contracts that allows us to terminate the contracts for convenience upon 30 days notice. We have simply exercised this option in the Cherokee contract," Metcalf said.

However, the CACFP contracts are being terminated for cause according to Metcalf. A recent monitoring report prepared by the state Department of Finance and Administration's Office of Program Accountability Review, questioned almost $92,000 in administrative fees that were paid to Cherokee between October 1, 1999 and February 29, 2000 for its meal reimbursement program. The report states monitors were not given access to financial accounting records to support allowable costs.

In addition, the report "disallowed" more than $80,000 in meal payments provided to Cherokee for its sponsored child care centers and homes for the period of December 1, 1999 through March 31, 2000. The meals were disallowed based on a number of non-compliance activities.

A special purpose examination of Ashanti Services requested by the department and conducted by the State Comptroller's Office found irregularities with the agency's requests for CACFP reimbursement. Ashanti allegedly submitted a number of claims based on the use of "estimated" rather than actual meal counts for its sponsored facilities. As a result, the agency received "unauthorized" CACFP funds. During the period between October 1997 and March 2000 the questionable costs for Ashanti included overclaims which exceeded $43,000. As of July 25, 2000, the outstanding balance due is approximately $15,000. This agency also reportedly was not identifying actual administrative costs on claims submitted, and may not have been eligible for the full amount of administrative payments received.

And in a separate monitoring report issued by Finance & Administration, the providers sponsored by Ashanti were found to have violated policies on non-food expenditures, meal pattern requirements, and required record-keeping functions.

"We are concerned about the integrity of our programs and being accountable for the federal and state funds we receive. These recent reports raised significant concerns and we felt it was necessary to terminate the two CACFP contracts for cause," Metcalf said.


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