By CA Staff Writer | March 13, 2025
Clarksdale, Ms – The federal government is demanding that Mississippi repay nearly $101 million in welfare funds that were misused during former Governor Phil Bryant’s administration. The U.S. Department of Health and Human Services (HHS) issued a penalty notice in December, marking the first time since the 2020 welfare scandal broke that federal officials have formally confirmed violations of spending regulations.
HHS oversees the Temporary Assistance for Needy Families (TANF) program, a $16.5 billion annual block grant designed to help low-income families. A federal audit determined that Mississippi misallocated funds on projects such as a volleyball stadium and a lucrative speaking contract for a celebrity athlete. The state’s Department of Human Services (MDHS), which administers the federal welfare funds and is still pursuing civil litigation against those involved, disputes the penalty amount.
The federal government based its repayment demand on findings from a 2019 state audit and a 2021 forensic audit. Of the total amount in question, $12.5 million was categorized as fraud, waste, or abuse due to conflicts of interest, mainly linked to former MDHS Director John Davis. The remaining funds were deemed “unallowable” due to improper documentation or failure to meet federal regulations. A significant portion—$40 million—was labeled a “questioned cost” because financial records were missing.
In response, MDHS Director Bob Anderson acknowledged the seriousness of the penalty but requested more time to validate the expenditures. He argued that some of the spending may have been allowable, but documentation has yet to be found.
The welfare scandal led to criminal charges against several individuals, including Davis and nonprofit directors Nancy and Zach New, who pleaded guilty to defrauding the state. Federal prosecutors also charged former professional wrestlers Brett and Ted “Teddy” DiBiase, nonprofit director Christi Webb, and neuroscientist Jake Vanlandingham. Teddy DiBiase is the only one still fighting the charges, with his trial set for August.
Mississippi’s penalty is unprecedented due to the weak federal oversight of how states allocate TANF funds. Historically, states have faced consequences for failing to meet recipient requirements, but not for misusing funds on outside expenditures. Elizabeth Lower-Basch, a TANF policy expert, stated that this may be the first instance of the federal government issuing such a penalty.
Once negotiations are complete, the federal government may withhold part of the $86.5 million in TANF funding Mississippi receives annually until the state repays the debt.
The scandal first surfaced in 2020 when a state audit revealed widespread fraud and abuse. Mississippi had been rejecting as much as 98% of TANF applicants while funneling millions of dollars to private organizations. Despite the fallout, federal regulations governing TANF spending remain unchanged, and proposed rule updates were withdrawn in 2023.
Lower-Basch criticized the misuse of welfare funds, arguing that it diverted resources from families in need. “The idea that struggling low-income families need someone rich and famous telling them to work harder is disgusting, but it’s allowed,” she said.
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