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State of Tennessee Comptroller of the Treasury - Private Probation Services Council: Performance Audit Report, 2018

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STATE OF TENNESSEE
COMPTROLLER OF THE TREASURY

PRIVATE PROBATION SERVICES COUNCIL

Performance Audit Report
December 2018

Justin P. Wilson, Comptroller

Division of State Audit

DEBORAH V. LOVELESS, CPA, CGFM, CGMA
Director
KANDI THOMAS, CPA, CFE, CGFM, CGMA
Assistant Director
DENA W. WINNINGHAM, CGFM
Audit Manager
Nichole Crittenden, CGFM, CFE
In-Charge Auditor
Drew Sadler, CGFM
Staff Auditor
Amy Brack
Editor
Amanda Adams
Assistant Editor

Comptroller of the Treasury, Division of State Audit
Cordell Hull Building
425 Fifth Avenue North
Nashville, TN 37243
(615) 401-7897
Reports are available at
www.comptroller.tn.gov/sa/AuditReportCategories.asp
Mission Statement
The mission of the Comptroller’s Office is to
make government work better.
Comptroller Website
www.comptroller.tn.gov

December 11, 2018
The Honorable Randy McNally
Speaker of the Senate
The Honorable Beth Harwell
Speaker of the House of Representatives
The Honorable Mike Bell, Chair
Senate Committee on Government Operations
The Honorable Jeremy Faison, Chair
House Committee on Government Operations
and
Members of the General Assembly
State Capitol
Nashville, Tennessee 37243
and

The Honorable Julie Mix McPeak, Commissioner
Department of Commerce and Insurance
500 James Robertson Parkway
Davy Crockett Tower
Nashville, Tennessee 37243-0565
and
The Honorable Larry J. Logan, Chair
Private Probation Services Council
8900 Hwy 436
McKenzie, TN 38201

Ladies and Gentlemen:
We have conducted a performance audit of selected programs and activities of the Private Probation Services
Council for the period July 1, 2013, through October 31, 2018. This audit was conducted pursuant to the requirements
of the Tennessee Governmental Entity Review Law, Section 4-29-111, Tennessee Code Annotated.
Our audit disclosed a finding, which is detailed in the Audit Conclusions section of this report. The Private
Probation Services Council has responded to the audit finding; we have included the responses following the finding.
We will follow up the audit to examine the application of the procedures instituted because of the audit finding.
This report is intended to aid the Joint Government Operations Committee in its review to determine whether
the Private Probation Services Council should be continued, restructured, or terminated.
Sincerely,

Deborah V. Loveless, CPA
Director
DVL/dww
18/026b

Division of State Audit

Private Probation Services Council
Performance Audit

December 2018

 

Our mission is to make government work better.

AUDIT HIGHLIGHTS 
The Private Probation Services Council’s purpose
is to ensure that uniform professional and contract standards are practiced and maintained by
private corporations, enterprises, and entities engaged in rendering general misdemeanor
probation supervision, counseling, and collection services to the courts.
Impro
We have audited the Private Probation Services Council for the period July 1, 2013,
through October 31, 2018. Our audit scope included a
Scheduled Termination Date: 
review of internal controls and compliance with laws,
 
June 30, 2019 
regulations, policies, and procedures related to the council’s
responsibilities in the following areas:


council member appointments, meetings, and reserve balances;



council oversight, including entity contract review and background screening;



council conflict-of-interest disclosures; and



initial licensure applications, annual license renewal applications, and quarterly fee
collections.

KEY CONCLUSIONS 
Our review resulted in one finding; two observations; and two matters for legislative consideration.

FINDING
 The Private Probation Services Council did not adequately oversee private probation
entities, putting probationers at risk, and did not ensure that Combined Boards staff
fulfilled its assigned duties for the council (page 8).

OBSERVATIONS
The following topics are included in this report because of their effect on the council’s operations
and on the citizens of Tennessee:
 Lawsuits against private probation entities call into question whether the council is
adequately overseeing the entities (page 15).
 Clarity is needed between the courts and the council concerning the division of
oversight responsibilities (page 16). 

MATTERS FOR LEGISLATIVE CONSIDERATION
The General Assembly may want to consider a review of the statutes governing the oversight
responsibilities of the courts and the council to identify and clarify any gaps or overlap in
supervision of private probation entities. Additionally, the General Assembly may wish to
consider an amendment to existing statute to include council meeting requirements, including
frequency and member attendance (page 17). The General Assembly may also wish to consider
whether statutory changes are needed to ensure that a private probation officer meets the clear
criminal history requirements (page 19).

TABLE OF CONTENTS
Page
INTRODUCTION

1

Audit Authority

1

Background

1

AUDIT SCOPE

2

AUDIT CONCLUSIONS

3

Finding –

Observation 1 –
Observation 2 –

The Private Probation Services Council did not adequately
oversee private probation entities, putting probationers at
risk, and did not ensure that Combined Boards staff fulfilled
its assigned duties for the council

8

Lawsuits against private probation entities call into question
whether the council is adequately overseeing the entities

15

Clarity is needed between the courts and the council
concerning the division of oversight responsibilities

16

Matter for Legislative Consideration

17

Results of Other Audit Work: Background Checks for Employees of Private
Probation Entities

18

Matter for Legislative Consideration

19

APPENDICES
Appendix 1 – Private Probation Services Council Membership

20

Appendix 2 – Private Probation Services Council Unaudited Financial Data

21

Appendix 3 – Private Probation Services Council Actively Licensed Probation
Entities

22

Performance Audit
Private Probation Services Council
INTRODUCTION 
AUDIT AUTHORITY
This performance audit of the Private Probation Services Council was conducted pursuant to
the Tennessee Governmental Entity Review Law, Title 4, Chapter 29, Tennessee Code Annotated.
Under Section 4-29-240, the Private Probation Services Council is scheduled to terminate June 30,
2019. The Comptroller of the Treasury is authorized under Section 4-29-111 to conduct a limited
program review audit of the agency and to report to the Joint Government Operations Committee of
the General Assembly. This audit is intended to aid the committee in determining whether the
Private Probation Services Council should be continued, restructured, or terminated.
Although the General Assembly created the council in 1998, it did not place the council in
the Governmental Entity Review Law until 2016.

BACKGROUND
The Private Probation Services Council is administratively attached to the Department of
Commerce and Insurance (the department). The council’s duties under Section 16-3-901,
Tennessee Code Annotated, are to ensure that uniform professional and contract standards are
practiced and maintained by private corporations, enterprises, and entities engaged in rendering
general misdemeanor1 probation supervision, counseling, and collection of court assessed fees,
fines, and restitution. Based on the department’s online license search system2 there are 32
actively licensed private probation entities statewide as of May 2018 (see Appendix 3).
Additionally, as required by Section 16-3-909, Tennessee Code Annotated, the council is
charged with


providing oversight of private entities;



promulgating uniform professional standards and uniform contract standards for
private entities;



establishing 40 hours of orientation for new private probation officers and 20 hours of
annual continuing education;



promulgating rules and regulations regarding noncompliance with the uniform
professional standards and uniform contract standards;



promulgating requiring periodic registration3 of all private entities;

1

Misdemeanors are those crimes that are punishable by up to a year in jail.
is the department’s Comprehensive Online Regulatory & Enforcement database.
3 The council, in rules, requires annual license renewal.
2 CORE

1



publishing an annual summary report; and



promulgating rules and regulations requiring criminal records checks of all private
probation officers.

As required by Section 16-3-905, Tennessee Code Annotated, the council is composed of
seven members (see Table 1), each serving four-year terms, while Section 16-3-908, Tennessee
Code Annotated, states that the council should meet at such times and places as necessary and
convenient. See Appendix 1 for current membership information.
Table 1
Private Probation Services Council
Membership Summary
Number
Member
Appointed
1
Criminal Court Judge representing a judicial district
within which one or more private entities provide
probation services
3
General Sessions Court Judge representing counties
within which one or more private entities provide
probation services
1
1
1

Publicly employed probation officer
Private probation officer or individual with expertise in
private probation
County Commissioner

Appointing
Authority
President of the
Tennessee Judicial
Conference
President of the
Tennessee General
Sessions Judges
Conference
Governor
Governor
Governor

Source: Section 16-3-901, Tennessee Code Annotated.

BACKGROUND

AUDIT SCOPE 

We have audited the Private Probation Services Council for July 1, 2013, through October
31, 2018. Our audit scope included a review of internal controls and compliance with laws,
regulations, policies, and procedures, in the following areas:


council member appointment, meetings, and reserve balance;



council oversight, including entity contract review and background screening;



council conflict-of-interest disclosures; and



initial licensure applications,  annual license renewal  applications, and quarterly fee
collections.

2

Management of the Private Probation Services Council is responsible for establishing and
maintaining effective internal control and for complying with applicable laws, regulations,
policies, procedures, and provisions of contracts and grant agreements.
We conducted our audit in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.

AUDIT CONCLUSIONS 
The Council’s Administrative Functions Are Handled by the Department’s Division of Regulatory
Boards
Because the council has no staff of its own, the council’s administrative functions are
handled by the department’s Division of Regulatory Boards (the division). The division provides
administrative and staff support to the various boards that perform the occupational licensing and
regulation of various professionals within Tennessee. The division receives fiscal and support
services from the department’s Administrative Division so that it can provide administrative and
support staff services to the boards. In addition, the department’s Office of Internal Audit assists
the division and the various boards by investigating allegations of fraud, waste, and abuse of state
funds and property. The Office of Internal Audit does not investigate complaints against licensees.
Each board is responsible for handling licensee complaints.
The division is led by an Assistant Commissioner who is responsible for the overall
functioning of the division. The Assistant Commissioner ensures that each board is assigned an
Executive Director and administrative staff, such as licensing technicians and administrative
assistants; however, some boards (such as the Combined Boards) share an Executive Director4 and
the administrative staff. The Private Probation Services Council is one such entity that falls under
the Combined Boards structure.
Based on discussion with the Executive Director, the Combined Boards have four5
employees who work directly with the council and other boards. This includes the Executive
Director, a Director, an Administrative Manager, and an Administrative Assistant. Additionally,
the division and Combined Boards management ensures that each board is assigned a lawyer who
advises and handles various aspects of the complaint process for the board.

4 The Executive Director for the Combined Boards oversees 14 programs and professions representing approximately
130,000 licensees including the Athletic Commission; Court Reporters; Architects and Engineers; Cosmetology and
Barbers; Real Estate Appraisers; Home Inspectors; Geologists; Scrap Metal Dealers; Soil Scientists; Land Surveyors;
Auctioneers; Collection Agencies; Debt Management Services, and Private Probation Services.
5 One Executive Director, who oversees 14 entities; one Director who works with 14 entities; one Administrative
Manager who works with 13 entities; and one Administrative Assistant who performs licensure activities for 3 entities.

3

Revenues, Expenditures, and Reserve Balance
The Private Probation Services Council receives revenue from initial licensure application
and licensure fees; quarterly fee payments; late fees; annual renewal fees; and penalties.
Initial Application for Licensure and Licensure Fees
Private Probation Services Council Rule 1177-01-.03 stipulates that no private entity may
provide probation services in Tennessee unless it is registered with and approved by the council.
The council’s application process requires the private probation entity to submit an application and
pay a $100 fee to the council for evaluation. The application process includes
 demonstrating the reasonable ability of the entity to provide the services continuously;
 demonstrating that staff qualifications meet or exceed requirements;
 submitting sworn criminal record reports on each employee or volunteer;
 submitting written policies and procedures, including the handling of court-ordered
fees, fines, restitution, and community services;
 submitting proof of liability insurance and performance bond;
 describing staffing levels and written standards of supervision; and
 submitting a schedule of the range of all probation fees and charges paid by
probationers they supervise.
Quarterly Fees
All licensed private probation entities are required by council Rule and Regulation 1177-01.08(1) to pay quarterly provider fees based on the number of probationers supervised. From 2005
until November 2016, the fee was $1 per probationer. Effective November 2016, the council reduced
this amount to 75 cents to lower the reserve balance. Further, for every 10 days the quarterly provider
fee payment is past-due, the company owes an additional 5 cents per probationer as a late fee.
Annual Renewal Fee
Council Rule 1177-01-.07 mandates an annual license renewal fee of $100. The rule also
stipulates that each private entity must notify the council within 30 days of a change in any
information submitted for initial licensure.
Civil Penalties
For regulatory enforcement, the council promulgated Rule and Regulation 1177-02-.07(2),
which defines three civil penalty categories to aid the council in enforcing the laws and rules
governing private probation entities:

4

1. Category I – ($700-$1,000) Violations involving fraud, providing false
information or documents, and failure to account or produce official court
documents and reports, including violations involving unregistered practice.
2. Category II – ($300-$699) Violations involving noncompliance with private
entity registration requirements such as failure to submit required periodic
reports and documents; violations involving Codes of Professional Conduct set
forth in 177-02-.04.
3. Category III – ($100-$299) Violations involving private probation entity
operations such as failure to maintain required records or documentation.
Reserve Balance
Section 16-3-910, Tennessee Code Annotated, empowers the council to establish fees
sufficient to pay the annual expenses of the council. As of June 30, 2017,6 the council had a reserve
balance of $689,520. The chart below illustrates the council’s reserve balances respectively. (See
Appendix 2 for detailed council financial information.)
Chart 1
Private Probation Services Council
Reserve Balance
For Fiscal Years 2014, 2015, 2016, and 2017

$654,972

$689,520

$590,749
$489,236

2014

2015

2016

Source: Provided by the Director of Operations, Division of Regulatory Boards.

6

At the time of our fieldwork, a reserve balance was not available for fiscal year 2018.

5

2017

Council Complaint-Handling Process
To aid in regulatory enforcement, the council accepts complaints from the public, including
Tennessee citizens, government employees, probation officers, and private probation entities. The
council’s website states the council was created to protect the public’s health, safety, and welfare
and that private probation entities and private probation officers who fail to follow the law and
rules of the profession are subject to disciplinary action. This site also provides a link to the online
complaint form.
Upon receipt of a complaint, council staff review the complaint to determine whether the
possibility of imminent danger to health, safety, or welfare to the public exists. If so, the complaint
is immediately routed to the council’s assigned legal counsel. If there is no immediate issue, the
complaint is forwarded to the respondent, who is given 14 days to provide a response. Upon
receipt, both the complaint and response are routed to legal counsel for review and if additional
information is warranted, an investigation is initiated. The legal counsel presents any findings to
the council, which will determine any action.
Clear Criminal History
The council, in Rule 1177-02-.05, requires a continued clear criminal record for each
owner, director, agent, employee, or volunteer who supervises probationers. The rule requires
these individuals to maintain a criminal record free of any felony conviction or plea of guilty or
nolo contendere,7 or any conviction or plea of guilty or nolo contendere for misdemeanors
involving moral turpitude.8 If there is such a conviction or plea, the individual has five business
days to report it to the council.
Audit Results
1. Audit Objective: Is the Private Probation Services Council properly organized as required by
statute? Did the council meet and provide adequate public notice of
meetings? 
Conclusion:

Our testwork disclosed that the council is composed of seven members as
required. We found that the council met 14 times from January 1, 2014,
through October 31, 2018, and provided adequate public notice.

2. Audit Objective: Did the Private Probation Services Council establish fees sufficient to pay
the annual expenses of the council pursuant to Section 16-3-910(1),
Tennessee Code Annotated? 
Conclusion:

The council has established fees and maintained a positive reserve balance
for fiscal years beginning July 1, 2013, through June 30, 2017.

7

Nolo contendere is a plea of no contest with an explanation that the person is agreeing to the charges without
admitting guilt.
8 Moral turpitude involves acts that shock the public conscience or do not fit with the moral standards of the
community.

6

3. Audit Objective: Did the Private Probation Services Council fulfill its statutory obligation to
provide oversight to ensure private probation entities complied with
uniform professional and contract standards to carry out daily operations for
private misdemeanor probation supervision, counseling, and collection
services to the courts?
Conclusion:

We determined that the council did not provide adequate oversight of
private probation entities, and as such left private probation entities with
limited regulation and probationers at risk (see Finding, Observation 1,
and Observation 2).

4. Audit Objective: Did the council ensure that the assigned Combined Boards staff collected
the private probation entities’ licensure fees, quarterly fees, annual renewal
fees, and late fees, when applicable, and that individuals supervising
probationers received required training?
Conclusion:

Due to missing documentation and files for initial licensure, renewal
licensure, and quarterly fees, we were unable to perform all related
objectives. Based on available information from our review, we found
numerous instances where staff over-collected quarterly fees and over- or
under-collected late fees. We also identified that the council’s assigned
staff did not maintain continuing education documentation and did not
perform regulatory reviews for any of the private probation entities (see
Finding).

5. Audit Objective: Did Private Probation Services Council members sign annual conflict-ofinterest disclosure forms? 
Conclusion:

Our review revealed that each council member is subject to Executive Order
20 regarding Conflicts of Interest for Executive Branch Employees, as well
as the prohibitions regarding lobbyists pursuant to Section 3-6-301,
Tennessee Code Annotated. On behalf of the council, the Department of
Commerce and Insurance’s Human Resources staff annually collect
conflict-of-interest disclosures from council members and forward the
disclosure forms to each regulatory board. However, Combined Board
management were unable to provide us with records of all member
disclosures from 2014 through 2017 (see Finding). 

6. Audit Objective: Did the council ensure that private probation entities complied with Section
16-3-909(a)(7), Tennessee Code Annotated, and council rule 1177-02-.05
to ensure that owners, directors, employees, and volunteers maintained a
clear criminal record? 
Conclusion:

Based on our review, the entities’ criminal record checks only included
checks of convictions in Tennessee and only at the time of initial application
for licensure (see Matter for Legislative Consideration on page 19).

7

Methodology to Achieve Objectives
To achieve our objectives, we researched laws, rules, and regulations; conducted interviews
with Combined Board management and staff; reviewed available council meeting minutes from
March 2014 to October 2018; and researched information on similar programs in other states to
gain an understanding of the Private Probation Services Council. We reviewed the council’s
website for meeting dates. The council also provides notification on the website that some meetings
may be canceled 30 days prior to the actual meeting date. For analysis purposes, we reviewed, for
the 32 active private probation companies as of May 2018, original licensure files, annual renewals,
and quarterly fee reports for private probation entities. We also requested to examine conflict-ofinterest disclosures for all council members for calendar years 2014 through 2017.
We attempted to evaluate the council’s oversight mechanisms, which included reviews of
initial licensure files, quarterly provider fee collections, and annual renewals. However, because
the Combined Boards did not maintain all documentation, we were unable to fully evaluate this
process, specifically the initial licensure process. We also interviewed a Criminal Court Judge in
Shelby County, who was the former council chair from 2004 to 2017; Criminal Court Clerk
personnel in Shelby County; the Administrative Manager for Combined Boards; and the Executive
Director for Combined Boards to discuss processes and oversight.
Finding – The Private Probation Services Council did not adequately oversee private
probation entities, putting probationers at risk, and did not ensure that Combined Boards
staff fulfilled its assigned duties for the council
Oversight Concerns
In order to fulfill its critical responsibilities to protect probationers and provide oversight
of private probation entities, the Private Probation Services Council (the council) is required by
statute to ensure these entities follow uniform professional and contract standards in dealing with
probationers’ supervision and counseling and with the collection of probation fees9 and/or courtordered fees, fines, and restitution.
Based on our testwork and review, we found that the council conducted limited regulatory
activity during their meetings and


did not establish a process to review private probation entity contracts,



did not establish a process to verify information reported by the private probation
entities, and



did not ensure the Combined Board staff fulfilled the administrative responsibilities of
the council and maintained required documentation, such as conflict-of-interest
disclosure forms.  
 

9

Probation fees can include not only monthly supervision, monitoring, and rescheduling fees, but also costs
associated with court-mandated classes, treatment, community service, and drug tests.

8

Limited Regulatory Activity Conducted at Meetings
From our review of the Department of Commerce and Insurance’s website, regulatory
entities, like the council, are authorized to take disciplinary action—including revocation of
licenses and assessment of civil penalties—against license holders found guilty of violating laws
governing their professions. Regulatory entities hear violation allegations and decide on
disciplinary action during publicly held meetings. Based on our review of minutes for 14 council
meetings held from January 1, 2014, through August 31, 2018, we determined the council heard
18 complaints that resulted in 2 enforcement actions.10 The remaining 16 were either dismissed
or closed without action. Since the council does not conduct regulatory audits, complaints were
the only source of oversight and possible disciplinary action during this period. Relying on
complaints as the only source of regulatory oversight, especially when not all concerns and
noncompliance may be reported through the complaint process, does not allow the council to
effectively regulate the private probation entities. Regulatory audits of these entities to assess
compliance with statute, rules and regulations, and entities’ policies would allow the council to
better regulate private probation entities, thereby protecting probationers from prohibited
practices.
Based on discussions with the former long-serving council chair,11 we determined that the
council was largely inactive from its inception until approximately 2005, leaving private probation
entities unregulated. This conclusion is further evidenced by the council’s failure to promulgate
statutorily required rules, including uniform contract standards and professional code of conduct
standards, until 2005 when encouraged by the then chair.
The council’s current chair was not appointed until August 2018; therefore, we did not
interview him during our audit fieldwork.
The Council Has Not Established a Process to Review Private Probation Entity Contracts and
Initial Applications for Licensure
The council has not established a contract review process to assist in the review of private
probation entity contracts. As such, the council has no way to ensure the private probation entities
complied with the uniform contract standards as outlined in council rules and regulations.
Furthermore, the process for initial licensure of a private probation entity does not include a review
or approval by the council. Without effective oversight of these entities, probationers are left
vulnerable to unscrupulous practices.

10

One complaint resulted in a consent order for the surrender of the license, but this action was due to another
company acquiring the licensed probation provider with the intent to cease probation monitoring services. The second
complaint resulted in a $1,000 civil penalty due to providing unlicensed private probation services.
11 The former council chair served from 2004 until his resignation in 2017.

9

The Council Has Not Established a Process to Verify Information Reported by the Private
Probation Entities
Because the council has not established a process to verify information reported by the
private probation entities, the council has not obtained critical entity information, such as


the location of all private probation entity satellite offices; 



a list of each entity’s contracts to provide services and which court districts it serves;



a list of individuals currently employed to supervise probationers; and



a description of services each entity provides for probationers. 

The council’s process should include better collaboration with the courts, which have the statutory
authority to audit these entities, and that could provide the council with critical information to
strengthen the council’s oversight of private probation entity operations. (See Observation 2 on
page 16 for further discussion).
The Council Did Not Ensure the Combined Boards Staff Carried Out the Council’s
Responsibilities
Combined Boards – Missing Initial Applications for Licensure and Quarterly Fee Collections
Initial Applications
We requested all initial application for licensure files for the 32 actively licensed entities
as of May 2018 to determine whether the entities submitted the required information, such as
policies and procedures, employee qualifications, employee background checks, and fee
schedules. The Executive Director for Combined Boards was only able to provide us with four
files. On behalf of the council, Combined Boards management is required by Record Disposition
Authorization12 number 10222 to retain all licensure and supplemental information for active
licenses. Management reported that many of these files are presumed lost due to the May 2010
flood as they were stored in the lower level of the Andrew Johnson Tower.
Additionally, the Executive Director for Combined Boards determined upon taking the
position that from July 2015 through 2016, the Division of Regulatory Boards’ staff failed to scan
any documents (including quarterly fee collections and licensure renewals) for placement into
FileNet, the electronic file storage. Of the four files provided for review, one originated prior to
the flood. From this file review, we identified an additional concern related to private probation
entities’ background screenings as described in the Results of Other Audit Work section.

12

Records Disposition Authorizations describe the public record, retention period, and destruction method for each
record type under an agency’s authority.

10

Quarterly Entity Fee Collection Review
We requested to review all quarterly fee collections made by private probation entities
submitted from January 2015 through May 2018. The quarterly fee payment form consists of two
pages: page one lists the total number of probationers with no identifiable information, the
quarterly fee payment due, and late fees due, while the second page is a notarized Applicant
Affidavit certifying that the submitted information is true and correct.
Based on private probation entity initial licensure dates, we determined that staff should
have provided us with 442 quarterly fee reports from the 32 actively licensed entities, but our
review revealed a total of 48 fee reports were missing (11%). We also identified several issues
with reports, leading us to conclude that staff did not review the reports. For example, we
identified reports in which the entities overpaid quarterly fees or did not pay the required late fees.
For overpaid fees, we determined that most overpayments were due to entities using old quarterly
report forms that required the higher payment rate of $1 rather than the current 75 cent rate. We
asked whether entities were issued refunds for these overpayments or billed for unpaid late fees,
and the Executive Director of Combined Boards reported that neither refunds nor bills were issued.
.
Combined Boards – Unattested Documentation
We also noted problems with one entity’s quarterly fee payment notarized Applicant
Affidavits. We documented several instances where the filings lacked a notarized affidavit and
some that simply lacked information on the affidavit, such as the year. We noted that this particular
entity reused photocopies of two old official notarized affidavit sheets a total of nine times.
Therefore, for nine quarterly fee reports, there was no valid Applicant Affidavit of information
submitted by this entity. Thus, there is no independent verification of a valid signature for the
private probation entity applicant swearing to the validity of the quarterly report information.
Because these affidavits are unattested documents as they were not properly executed, if staff had
noted the discrepancies, the council could likely have imposed a civil penalty. Failure to identify
these discrepancies further highlights the inadequate review of submitted documents and directly
impacts the council’s ability to effectively oversee private probation entities.
Combined Boards – Missing Annual Renewal Documentation
We requested all renewals for actively licensed companies from January 2015 through June
2018. The annual fee renewal documentation consists of an application for renewal, renewal
payment, proof of insurance and performance bond, and continuing education compliance at a
minimum. As with the other two document reviews discussed above, staff were unable to provide
us with documentation needed to perform our testwork. Considering the original licensure dates
of companies, we expected management to provide 108 annual renewal applications for the period
reviewed, but management could only provide 76 of the 108, meaning 32 documents were missing
(30%).
As part of our renewal application review, we attempted to document compliance with
continuing education requirements. Council Rule 1177-3-.01(2) requires employees supervising
probationers to complete 20 hours of annual in-service training. We found that 30 of 76 files

11

provided (40%) lacked either a detailed confirmation of employee continuing education or an
affirmation letter from company management stating that employees received required training.
In addition, council rule 1177-03.01(2) allows the council to withhold a renewal registration of
any entity where any employee has not received the required annual in-service training hours. We
did not see evidence that any renewal licenses were denied due to noncompliance of training.
We confirmed with the Executive Director of Combined Boards that staff did not conduct
reviews of the entities to ensure training compliance. We also found that while rules and
regulations specify the council can audit the companies to ensure compliance with orientation
training requirements, there is no such provision for annual in-service training.
Combined Boards Did Not Maintain Council Members’ Conflict-of-Interest Forms
Based on discussion with the Executive Director for Combined Boards, each Private
Probation Services Council member is subject to Executive Order 20 regarding Conflicts of
Interest for Executive Branch Employees, as well as the prohibitions regarding lobbyists pursuant
to Section 3-6-301, Tennessee Code Annotated.
The department’s Human Resources Division collects conflict-of-interest disclosures
annually from council members and forwards the completed forms to Combined Boards staff.
Staff were unable to provide us with records of all member disclosures from 2014 through 2017.
Overall, staff could not provide 7 of 28 expected conflict-of-interest disclosures (25%) for the
years reviewed. The breakdown of missing forms by year is in Table 2.
Table 2
Missing Conflict-of-Interest Disclosures
By Calendar Year
Year
2017
2016
2015
2014

Received Missing
Forms
Forms
4
3
5
2
6
1
6
1

Total
7
7
7
7

Percent
Missing
43%
29%
14%
14%

Based on discussions with the Executive Director for Combined Boards, the Human
Resources Division collects conflict-of-interest forms and forwards them to the council staff but
does not keep a copy of the completed forms in Human Resources. Therefore, neither the Human
Resources Division nor the Combined Boards staff were scanning the disclosures for
recordkeeping purposes. The absence of conflict-of-interest disclosures means that neither the
staff nor the public is informed of potential conflicts.
The Executive Director for Combined Boards should ensure that conflict-of-interest
disclosures for members are completed and properly maintained for public inspection.

12

Overall Effect
Private probation entities have been operating without adequate council oversight since the
council’s existence, leaving probationers vulnerable. The effect of inadequate oversight is
exhibited by the recent lawsuits and settlements involving the operations of private probation
entities. Our documentation review reinforces the immediate need for more direct oversight of
these entities by the council and the courts they serve (see Observation 1).
Periodic reviews of these entities would allow the council to monitor each entity’s
compliance with state laws; council rules and regulations, such as compliance with continuing
education requirements; and compliance with uniform professional code of conduct and contract
standards. The results of these reviews would provide the council the critical information it needs
to ensure entities’ compliance with established rules and regulations. The council would also have
information and evidence to carry out its civil penalty enforcement responsibilities. In the absence
of these reviews, complaints are the only mechanism for regulatory violation discovery.
As for oversight clarity, if possible, the council should work with the courts to improve the
content of contracts with the entities that would enhance entity reporting as well as identify ways
to collaboratively monitor probationer placement and private probation entity performance (see
Observation 2).
Recommendation
The Private Probation Services Council should do the following:


Establish the processes needed to fulfill all oversight responsibilities, including entity
contract reviews, and direct the division-assigned staff to perform the regular review
of private probation entities. These reviews should include compliance with state
statute, uniform contract standards; uniform professional conduct standards;
orientation and continuing education; and determining whether the number of
probationers submitted for quarterly fee payments are accurate, at a minimum, along
with any regulatory noncompliance reported to the council for enforcement action.



Consider adopting bylaws for consistent governance.



Consider expanding the training audit provision in Rule and Regulation 1177-3.01(1)(e) to include in-service training.



Consider working with the courts to develop an enhanced or collaborative monitoring
program for the private probation entities.

The Executive Director for Combined Boards should ensure staff are trained and
understand their responsibilities to the Private Probation Services Council, including but not
limited to


obtaining and maintaining all required documentation from private probation entities;



ensuring entities submit all required fees; and

13



instituting a process to ensure the maintenance of complete files for each licensee as
required by the Records Disposition Authorization 10222. 
 
Management’s Comment for Private Probation Services Council
I concur with the Private Probation Services Council final draft. Our board was only
recently appointed. We have had only one meeting in person and one telephone conference. I was
appointed chairman at the first meeting and am still trying to become familiar with this process. I
apologize for my lack of familiarity with the audit process. I have stayed in contact with the
agency and thoroughly reviewed the final draft.  
Management’s Comment for Department of Commerce and Insurance
We concur in part. We concur that the department’s staff should carry out the legal
responsibilities of the council to ensure documents are maintained, fees collected, reports notarized,
required renewal documentation filed, and conflict of interest statements obtained and maintained
according to statute. Regrettably, mistakes were made in the transition to the department’s current
licensing system and new processes will be followed to prevent reoccurrence of these issues. The
quarterly fee issue was addressed through clarification to all licensees as well as improved internal
tracking. Staff has been instructed to check that documents are properly attested. With respect to
documentation of training compliance, staff is not required to “conduct reviews … to ensure training
compliance” because the licensee is tasked with supplying the correct information and attesting to
its accuracy. Staff has been trained to timely gather council members’ conflict of interest forms.
Regarding the statement that the only method of regulation by the council is through
complaints, initial licensure requirements imposed by the council provide additional regulation.
However, the department views a complaint-based regulatory scheme component as a positive
means of effectively regulating the industry without overburdening the licensees with the higher
costs that a “regulatory audit” scheme would require.
The findings include a recommendation establishing a private probation entity contract
review process not currently required by statute to enforce the council rules and regulations.
T.C.A. § 16-3-909(a)(2) requires promulgating uniform contract standards for private entities. The
council met this requirement through Tenn. Comp. Rules & Regs. 1177-02-.03, which specifies
what should be in a contract between the licensee and the probationer. Failure to follow the rules
and regulations with respect to these contracts is currently enforced based on complaints, which
could be anonymous, filed by probationers or local entities using the private probation entity, or
any citizen. Implementing contract review for third parties, such as counties, would require either
the establishment of a required form contract(s) or require increases in fees to cover the individual
contract review services. Increasing the regulatory costs for private probation entities will increase
the cost for probationers, which may pose a hardship on them.
Reviewing contracts between third parties should be a matter negotiated by those parties.
Under the current statutory scheme, it is inappropriate for the council to dictate the terms of these
contracts, for example, an indemnity provision.

14

Requiring a process to verify information reported by the private probation entities,
including the location of all private probation entity satellite offices, list of contracts and districts
served, individuals employed to supervise probationers, and a description of the services provided
for probationers, could be viewed as a duplication of services as courts have the statutory authority
to audit the entities.
In the finding, it is recommended that the council adopt bylaws. The department would want
to ensure that consideration be given to whether bylaws, rules, or policies are appropriate in light of
the newly adopted provisions in Title 4, Chapter 5 of the T.C.A. With respect to expanding the training
audit provisions of Tenn. Comp. Rules & Regs. 1177-3-.01(1)(e) and developing an enhanced
monitoring program for private probation entities, these are also currently enforced via complaint and
the duty of the licensee to provide updated information to the department. The department would defer
to the legislature for direction as to whether increased regulatory oversight is appropriate.
Auditor Comment
Section 16-3-909(a)(1), Tennessee Code Annotated, states that the council shall “provide
oversight of private entities.” To fulfill its oversight role, the council would need to establish an
enhanced monitoring process to meet its responsibilities. More specifically, the purpose and duties
contained in Sections 16-3-902 and 16-3-909(a), Tennessee Code Annotated, state,
The purpose of the council is to ensure that uniform professional and contract
standards are practiced and maintained by private corporations, enterprises and
entities engaged in rendering general misdemeanor probation supervision,
counseling and collection services to the courts.
Additionally, although the Department of Commerce and Insurance views a “complaintbased regulatory scheme component as a positive means to effectively regulate,” neither the
enabling statute nor the council’s rules specifically mention “complaints” or describe a
“complaint-based” process to fulfill the council’s statutory responsibilities.
Although the council has promulgated rules in satisfaction of its statutory mandate, the
council does not currently have processes in place to ensure that the statutes and rules are followed.
To comply fully with statute, the council needs to develop processes that proactively assess that
compliance, not just respond to complaints as they arise.
 

Observation 1 - Lawsuits against private probation entities call into question whether the council
is adequately overseeing the entities
In October 2015, Civil Rights Corps, on behalf of seven named plaintiffs, filed a lawsuit
in the U.S. District Court in Nashville accusing Providence Community Corrections, on contract
with Rutherford County, of punishing low-income people on probation with excessive fees, court
costs, jail time, and probation extension. As a result, in December 2015, the judge ordered the
release of inmates sent to jail for non-payment of fees and barred the serving or execution of
warrants for arrest on the basis of nonpayment of court costs, fines, or probation or other fees.

15

The parties reached a settlement that was finalized July 18, 2018, the final order being
approved for $14.3 million ($14 million being paid by Providence Community Corrections and an
additional $300,000 by Rutherford County). The final order stated that approximately 25,000
individuals could be eligible for awards.13. Overall, the court deemed 6,462 of 7,961 claims were
valid, resulting in an award range of $1,500 to $2,100 for each claim. The seven named plaintiffs
received incentive awards of $10,000 each. Furthermore, Rutherford County reverted to in-house
probation rather than entering into another contract for private probation services. Most recently,
Civil Rights Corps filed another lawsuit in April 2018 against two private probation entities
contracted by Giles County alleging similar grievances. Litigation is ongoing.
Observation 2 - Clarity is needed between the courts and the council concerning the division of
oversight responsibilities
Oversight of private probation entities is divided between the Private Probation Services
Council and the courts they serve, likely resulting in uncertainty about which entity (the council
or the applicable court) should directly oversee these entities.
Misdemeanor sentencing guidelines in Section 40-35-302(g)(1)(A)(iv), Tennessee Code
Annotated, require private probation entities to maintain documentation on all misdemeanor
defendants supervised by the entity. All books, records, and documentation relating to work
performed or money received for the supervision of misdemeanor defendants must be maintained
for a period of three full years from the date of the final payment or audit. The records are subject
to audit, both fiscal and performance, at any reasonable time and with reasonable notice by the
court or courts in which the entity operates.
While this statute is specific to the court’s authority to audit, the council’s powers and
duties listed in Section 16-3-909(a)(1), Tennessee Code Annotated, simply state the council is to
provide oversight of private entities.
Court Probationer Assignment and Quarterly Report Data Verification
From our interviews with the previous chair of the council, who is a Shelby County
Criminal Court Judge, and a Shelby County Criminal Court clerk employee in the same
jurisdiction, we observed that the Shelby County courts lacked mechanisms to track probationers
or verify quarterly report data submitted by the private probation entities.
No Mechanism to Track Probationers
Without a method to track probationer assignment, the courts are unable to evaluate
compliance with misdemeanor private probation order requirements to ensure probationer

13 The Final Order defined the certified class as “All persons who, at any time from October 1, 2011, to October 5,
2017, (1) incurred court-imposed financial obligations arising from a traffic or misdemeanor case in Rutherford
County General Sessions or Circuit Court; and (2) were supervised on probation in that case by Providence
Community Corrections, Inc. or Rutherford County’s Probation Department.

16

supervision and successful fulfillment of probation orders by the probationer, such as training,
counseling, and payment of court fines, fees, and restitution.
In our discussion with the former chair, we learned that there is no centralized mechanism,
electronic or otherwise, to determine which probation entity the court assigns each probationer for
supervision. The current assignment process includes a triplicate probation order, with one copy
placed in the court hard copy file, one copy to the probationer, and one to the probation company.
Currently, to determine where a probationer is assigned, the court would have to review the
physical file.
We also determined that currently these courts do not have a simple solution to correct the
tracking problems and are currently unable to easily assess what fees, fines, and restitution are
outstanding.
Neither the Courts nor the Council Has Mechanisms to Verify Quarterly Report Data
State statute and council rules require private probation entities to submit quarterly reports
to every court to which they provide services. The reports include information such as caseloads,
number of contact hours with offenders, services provided, and financial statements. Based on our
discussions with Shelby County court clerk personnel, we determined that they receive and file
the quarterly reports but do not review them. Moreover, we were told “no” when asked if there
was a way to determine what fines and fees the private probation entities collected on behalf of
the probationers.
Other Concerns
The Executive Director of Combined Boards expressed similar concerns to the council
about auditing private probation entity information, specifically in-service training requirements.
However, the council members, at that time, felt that either they should not audit or that they lacked
the statutory authority to conduct these types of reviews.
Matter for Legislative Consideration
The General Assembly may want to consider reviewing the statutes governing the
oversight responsibilities of the courts and the council to identify and clarify any gaps or overlap
in supervision of private probation entities. Also, the General Assembly may wish to consider an
amendment to existing statute to include council meeting requirements, including frequency of
member attendance.

17

RESULTS OF OTHER AUDIT WORK: BACKGROUND CHECKS FOR EMPLOYEES OF
PRIVATE PROBATION ENTITIES
The Private Probation Services Council does not require private probation entities to
conduct national criminal record checks and periodic criminal record checks on its employees to
ensure a clear criminal history. Based on our review of available documentation for the four initial
licensure applications as mentioned in the finding, we determined that private probation entity
criminal record checks of employees and volunteers consisted of only a Tennessee criminal history
records request, which does not include fingerprinting. The Tennessee Bureau of Investigation
(TBI) states in the criminal history record request results that
unless a fingerprint comparison is performed, it is impossible for the Tennessee
Bureau of Investigation to be sure the record belongs to the individual you
requested. A fingerprint comparison will only be performed in the event of a
written appeal of criminal history results. The information you receive will be
based on only those arrests which occurred within the state of Tennessee.
To further illustrate, the Tennessee Department of Correction employs probation and
parole officers with similar job responsibilities as private probation officers. We determined that
the Department of Correction requires Probation/Parole Officers, upon application for
employment, to


complete a criminal history disclosure form;



agree to release all records involving their criminal history;



supply a fingerprint sample to the TBI for a fingerprint-based criminal history
records check; and



have no conviction for a felony or any domestic assault convictions or have
been discharged under any other than honorable conditions from any branch of
the United States armed forces.

Simply verifying arrest records within Tennessee does not fully satisfy the rule that
employees and volunteers must be free from any felony conviction or misdemeanor involving
moral turpitude. Fingerprint checks would assist in preventing individuals who were convicted in
these categories from obtaining employment as probation officers from any state, not just
Tennessee. Likewise, periodic checks could provide additional assurance that employees of the
entities have consistently maintained a clear record and assist in identifying convictions that were
not reported to the council as required.
While the rules do not require fingerprint or national checks and statute does not expressly
allow for fingerprint checks, the rule stipulates that employees or volunteers must be free of any
felony conviction or misdemeanor involving moral turpitude. A complete criminal history check
would include nationwide information using a fingerprint criminal history check.

18

Matter for Legislative Consideration
The General Assembly and the council should consider whether statutory changes are
needed to ensure that a private probation officer meets the clear criminal history requirements.
Changes could include conducting fingerprint checks and online checks, such as the Drug Offender
Registry, Tennessee Felony Offender Database, and National Sexual Offender Registry.

19

APPENDIX 1
Private Probation Services Council Membership
as of October 10, 2018
Name
Term
Position
14
Judge Lynn Alexander
Municipal Court Judge with General
3/29/18 – 5/31/22
Sessions Jurisdiction
Linda Byford
10/14/14 – 8/31/18 Public Probation Officer
15
9/1/17 – 8/31/21
County Commissioner
Stancil Ford
Judge Brody Kane
5/9/18 – 5/31/22
Criminal Court Judge
Judge Larry Logan – Chair
6/1/18 – 5/31/22
General Sessions Court Judge
David Nimmo
5/26/16 – 8/31/22
Private Probation Officer
Judge Gary Starnes
6/1/18 – 5/31/22
General Sessions Court Judge
Source: Member Terms: Director of Combined Boards.
Judges: Administrative Office of the Courts website.

14
15

For terms expiring August 31, 2018, the member can continue to serve until a new appointment is made.
The member became ineligible on August 31, 2018, due to loss of county commission seat.

20

APPENDIX 2
Private Probation Services Council
Unaudited Financial Data*
For the Period July 1, 2013, Through October 31, 2018
16

Expenditures
Regular Salaries and Wages
Longevity
Overtime
Employee Benefits
Total Payroll Expenditures

2014
$6,528
3,599
10,127

2015
$3,542
2,176
5,718

2016
$15,633
720
10,136
26,489

2017
$13,453
8,142
21,595

Travel
Communications and Shipping
Third Party Prof. and Admin Services
Supplies and Office Furniture
Computer Related Items
State Professional Services
Total Other Expenditures

898
181
72
107
111
9,014
10,382

169
192
104
8,839
9,304

95
264
229
8,981
9,568

303
43
38
7
9,263
9,655

7
99
110
29
8,482
8,727

Cost Backs
Edison
Administration
Investigation
Legal
Field Enforcement
Customer Service Center
Total Cost Backs

5,044
8,335
13,379

8,604
1,861
10,465

4,929
5,752
5,467
180
16,327

5,721
7,250
1,771
330
15,072

34,191
5,664
463
5,636
433
46,387

Total Expenditures

33,888

25,488

52,384

46,322

80,580

127,147
190
126,957

126,058
1,143
200
127,001

115,925
857
175
116,607

81,210
340
80,870

69,737
300
69,437

93,069

101,513

64,223

34,548

(11,143)

Prior Fiscal Year Reserve

396,389

489,236

590,749

654,972

689,520

Reserve Balance

489,458

590,749

654,972

689,520

678,377

222

-

-

-

-

Reserve Balance after CORE Expense
$489,236 $590,749 $654,972
Source: Received from the Executive Director of Combined Boards.
*Totals may vary due to rounding.

$689,520

$678,377

2018

$15,736
9,730
25,466

17

Revenues
Licensing Revenue
Case and Complaint Revenue
Less: State Regulatory Fee
Net Revenue
Fiscal Year Balance

CORE Expense

16
17

Fiscal year 2018 revenues and expenditures were only available through May 2018.
Cost backs include administrative, investigation, legal, field enforcement, and customer service shared functions.

21

APPENDIX 3
Private Probation Services Council
Actively Licensed Private Probation Entities
As of May 2018
Private Probation Entity
Alternative Correctional Services
Alternative Judicial Services LLC
Community Probation Services
Community Supervision Inc.
Correctional Management Systems LLC
Corrections Management Corporation
County Probation
Crossroads Area Alcohol and Drug Association
East Tennessee Probation Inc.
Grace Resource Agency LLC
Marshall County Misdemeanor Probation
Misdemeanor Offender Program
Misdemeanor Probation Service
Mountain Empire Corrections
National Probation of America
Northwest Alternative Correction
Probation Management Group Inc.
Probation Services Incorporated
Probation Services of Tennessee Inc.
Probation Works LLC
Progressive Sentencing Inc.
Smith County Misdemeanor Probation
South Central Probation Service
Spartan Probation Services
Supervisory Services Inc.
Tennessee Correctional Services West Inc.
Tennessee Court Services LLC
The Justice Network
Tennessee Correctional Services LLC
TN Judicial Court Support Inc.
Westin Services Inc.
Westate Probation Services Inc.

Initial Licensure Date
2/7/2006
6/9/2014
11/10/2005
9/9/2014
3/12/2010
2/7/2006
2/13/2006
2/7/2006
7/10/2006
12/18/2008
2/7/2006
6/23/2006
6/7/2006
6/7/2006
6/7/2006
3/22/2006
12/7/2005
12/13/2005
2/21/2006
2/10/2006
12/21/2005
12/21/2005
3/17/2006
8/26/2010
12/13/2005
8/25/2017
12/1/2015
11/7/2005
11/18/2005
12/21/05
2/6/2006
12/21/2005

Source: CORE Licensure Data, Received from the Executive Director of Combined Boards.

22

 

 

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