Company's Auditors Find False Billings - | Nashville News, Weather & Sports

NewsChannel 5 Investigates: Friends in High Places

Company's Auditors Find False Billings

(Story created: 10/16/02)

First, there was the FBI-TBI investigation of Workforce Strategists.

Now, the company's own auditors are raising red flags. They say Workforce Strategists billed taxpayers for work it didn't do.

Workforce Strategists has been at the center of our NewsChannel 5 investigation, "Friends in High Places." The Chattanooga company was started by John Stamps, a longtime friend of the governor, just before it got a three-year, $2 million state contract in 1999.

Under that contract, Workforce Strategists was supposed to provide intensive counseling to help the unemployed get back to work.

For weeks, Sundquist administration officials have dismissed questions raised by our NewsChannel 5 investigation regarding bills submitted by Workforce Strategists.

But the audit -- conducted by Wilkins, Crews & Henderson, certified public accountants out of Chattanooga -- says there have been some serious problems with those billings.

Among the findings:

  • Workforce Strategists charged taxpayers for clients who were inactive or who had completely left the program.
  • The company also continued to charge for clients who had been in the program longer than six months. That's the limit set in the state contract.
  • The company says those questionable billings totaled $138,600 last year.

"Amounts received as compensation in error may need to be returned to the state," the auditors conclude.

Workforce Strategists was required to hire an accounting firm and submit the audit as a condition of its state contract. The audit only covers the company's finances for 2001.

In a response attached to the audit, Stamps blames the billing problems on sloppy accounting.

"It has become clear that there is a lack of communication between program counselors and the accounting department," Stamps writes.

Still, he argues that his company helped other clients for whom it did not bill -- and that the total amount charged to the state would come out the same if those were counted.

"It is our understanding with the state that we may substitute participants we served, but were not compensated for, with participants for which we were compensated in error," he adds.

A spokesperson for the Tennessee Department of Labor and Workforce Development said the Sundquist administration had not seen the audit and could not comment.

This comes two weeks after FBI and TBI agents seized records from the Chattanooga company. The contract is also being reviewed by the state comptroller's office.

Workforce Strategists shut its doors Oct. 1 when its funding ran out. The Sundquist administration had delayed signing a new $744,000 contract while it reviewed questions raised about the company.

That decision had a crippling effect since the state contract represents 99% of the company's business, the audit notes.

"While management has been investigating the possibility of providing services to independent businesses, the ability of the Company to continue as a going concern is currently dependent on the approval of the new state contract," auditors observed.

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