N.C. mental health center audit reveals messy finances

Before the state took control of it early this year, the Albemarle Mental Health Center was $2 million in the red and its finances were in such shambles that it was doubtful the entity had the ability to survive, according to a recently released independent audit.

The audit for fiscal year 2007- 08 showed that the 10-county agency had wiped out its fund balance, had put thousands of dollars designated for retirement costs in the general fund and had used Medicaid reimbursement funds intended for private provider services to pay other bills.

"What they were doing was grabbing any money they could in order to stay afloat," said Jim Jarrard, chief of the Resource and Regulatory Management section of the North Carolina Division of Mental Health, Developmental Disabilities and Substance Abuse Services. "They overspent in just about every one of the areas of their budget, and they did not do budget revisions until after the fact."

In January, the center's board announced it was divesting its direct services and laying off about 80 staff members.

Days later, after an internal audit revealed that the center was broke and had been providing inadequate services, the board fired its longtime director, Charles R. Franklin.

At the time, Franklin's base salary was $282,663 a year, more than two times the average paid to the other 29 area program directors in the state.

Richard Johnson, chairman of the board charged with overseeing the center, said concerns were raised with Franklin about questionable transfers and that he did not stay on top of it as he should have.

A man who answered a phone call last week to a number listed in Franklin's name said he "had no comments" and hung up.

The center has served about 3,000 clients in Camden, Chowan, Currituck, Dare, Hyde, Martin, Perquimans, Pasquotank, Tyrrell and Washington counties. In July, management of the center was contracted to another entity.

K.E. Pittman, former chairman of the board's finance committee, said he was "somewhat embarrassed" by the abysmal financial picture the latest audit details, but the two previous audits did not reflect such dire straits.

Pittman, a retired internal auditor, said that he became aware of the desperate fiscal circumstances in 2008 when he began hearing from care providers who were not getting paid for their services.

"I don't think anyone profited from the deterioration of the entity," he said. "I think it's basically mismanagement."

Jarrard, with the state mental-health division, said previous independent audits did not provide the red flags that a subsequent state review found. The most recent audit, released Monday, has been forwarded to the State Bureau of Investigation for review.

"I don't think that there was corruption," he said, explaining that the center was probably over its head in its dual role as a manager and provider of services over a huge geographical area. "It was dispersed in so many places that I'm not sure the agency saw itself as a whole."

Catherine Kozak, (252) 441-1711, cate.kozak@pilotonline.com