The former executive director of Mecklenburg Open Door - a contractor that has received millions in government dollars - borrowed money from the group without repaying it and used a corporate credit card for personal expenses, according to an internal investigation.
The credit card charges included dental work, veterinary services and grocery bills.
Former Executive Director Ed Payton previously admitted to the Observer that he violated agency policy, and that it led to his dismissal.
Government money accounts for more than 90 percent of Mecklenburg Open Door's budget, according to IRS returns for the nonprofit mental health group.
But at a county meeting Tuesday, Mecklenburg County General Manager Michelle Lancaster said officials are unsure whether any local tax dollars were misspent.
It's also unclear how much unauthorized money Payton may have used.
Meanwhile, Mecklenburg Open Door leaders have turned over to law enforcement the findings of their probe into financial problems, the Observer has learned.
Jim Cook, president of the nonprofit's board of directors, would not say which law enforcement agency has been notified. Asked whether he thought laws were broken, Cook said: "I will leave that to law enforcement to make that determination."
Open Door, one of the largest contractors for the county's Area Mental Health department, has been in the spotlight for weeks after a federal agency raised questions about record keeping and county oversight of a housing program.
The county has said it will end its relationship with the group by Nov. 30.
Details of Payton's reported activities were outlined Tuesday during a special meeting of the county's Audit Review Committee. The session was called after an Observer report Friday into financial problems at the agency, including a federal lien for failure to pay more than $53,000 in payroll taxes.
Open Door hired Concord accountant William Barbee to conduct its internal investigation. Among the preliminary findings:
Payton got unauthorized "pay advances" from the organization from February 2007 through May 2010. He claimed he was going to repay the money with year-end bonuses that he ultimately never received, according to the Aug. 13 report released by the county.
The report doesn't say how much unauthorized money Payton received. But before the investigation, Payton had repaid just 26 percent of the money. As of mid-August, 55 percent of the money had been repaid.
Payton used a corporate credit card issued by Open Door for personal expenses, according to the report. Among the charges: Duke Energy, Harris Teeter and PayPal.
From early 2009 to May 2010, Payton also operated an Open Door vehicle for unauthorized personal use.
Mecklenburg Open Door's financial controls were lacking. A receptionist controlled both checks and a signature stamp, the report said. Supervisors didn't review credit card usage to evaluate the business purpose of expenditures. And no audits had been completed at Mecklenburg Open Door since 2007.
Payton, who was fired from the agency on Aug. 3, could not be reached for comment Tuesday. The accountant's report said Payton agreed to forgo his final pay as partial repayment of what he owed. He also agreed to make an additional payment by Oct. 1.
Agency late on payments
Meanwhile, two agencies that provide housing to Mecklenburg Open Door clients say the nonprofit hasn't paid them recently.
Jeff Greene, manager of Charlottetown Manor, said the group is late on $62,000 in rent payments for 75 mentally ill clients housed at its facility on Independence Boulevard.
He said Open Door's directors have told him they're experiencing "cash flow distress" and have given no indication the organization will be able to pay its debt.
The clients are in Mecklenburg Open Door programs designed to provide stability to people who would otherwise be in jail or living on the streets.
But if Charlottetown Manor doesn't soon get paid, it no longer will be able to house those people, Greene said.
"There is no remedy in sight without the county's intervention," Greene said
A second agency, the ARC of North Carolina, says it is owed more than $20,000 in rent payments for mentally ill clients living at properties it manages, according to ARC executive director Dave Richard.
The president of Open Door's board of directors has said that money will be paid, Richard said.
No annual audit
Mecklenburg Open Door has about 90 employees and a budget around $6 million. The 25-year-old group serves more than 500 mentally ill clients, helping many of them get housing and services.
The agency has received more than $19 million in government money during the past five years.
The county's contract with Open Door did not call for an annual audit. County officials say they want to start requiring annual audits for other nonprofits and companies they contract with.
Grayce Crockett, the director of the county's mental health department, was put on leave Friday amid questions about how her department handled the Mecklenburg Open Door contract.
For example, County Manager Harry Jones and Lancaster say Crockett knew about the payroll tax lien, but did not tell county management.
But county administrators, including Lancaster and Internal Auditor Joanne Prakapas, say they first became aware of an investigation at Open Door in early summer. The review, they said, was focused on questions surrounding Payton's payroll advances.
As the investigation into Open Door unfolded, the county agreed to continue working with the nonprofit, in part to ensure that client services were not disrupted, Lancaster said.
That changed in recent weeks, Lancaster said, when the U.S. Department of Housing and Urban Development raised concerns about the nonprofit's handling of a federal housing program for people with mental illness, substance abuse problems or HIV/AIDS.
The HUD report criticized Mecklenburg Open Door for not keeping adequate records and faulted the county for failing to hold the nonprofit accountable for its work.
In response to the findings, the county terminated one employee and reprimanded another.
Questions about delay
The HUD report was first shared with the county's Audit Review Committee and county commissioners two weeks ago.
But at those meetings, county administrators didn't disclose information about the nonprofit's internal investigation and questions about Payton's payroll advances - an omission that drew sharp questions from some audit committee members on Tuesday.
Ward Simmons, a citizen member of the audit committee, said the Aug. 13 report from Open Door's accountant contained "substantial" findings.
"It seems to me that should have been shared with us at" a Sept. 7 meeting of the audit committee, Simmons said.
Commissioner Dan Murrey, who chairs the audit committee, also questioned why the board didn't learn sooner.
Jones said the delay occurred, in part, because the county was dealing with layoffs from budget cuts and commissioners have fewer meetings in the summer. He also said some information hadn't been shared with county administrators at the time of the early September meetings.