Mental health group can pay only half wages

Staff WriterMay 28, 2010 

  • The Mental Health Association of North Carolina is the state's affiliate of the national group Mental Health America, which was founded in 1909 by a former psychiatric patient. The group incorporated its first chapter in 1939 and now has 27 local affiliates across the state.

    MHA is well regarded at the state legislature as an advocacy group for people with mental illness, but it is also a major service provider. It runs treatment and education programs, as well as residential group homes. Most of these services are paid for by taxpayers through state and federal programs such as Medicaid and Medicare.

— The state's oldest and largest mental health advocacy group is in such deep financial trouble it cannot fully pay its workers.

A memo sent this week to the more than 200 employees of the Mental Health Association of North Carolina says they will receive paychecks today for only 50 percent of what they have earned.

Christine Foppiano, the interim executive director of the Raleigh-based association, declined to speak Thursday about problems at the group, which receives tens of millions of dollars in taxpayer money to provide housing and services to about 2,500 people who are mentally ill or developmentally disabled.

"I really can't make any sort of comment on our financial situation," Foppiano said. "I believe the note speaks for itself."

Frank Edwards, a board member at the Wake County chapter of the National Alliance for Mental Illness, said that word had been quietly circulating for months about financial problems at MHA. Many are now wondering whether the group will remain viable, and who will care for those now receiving help from the association.

"I'm afraid they are not going to survive as a provider of services," Edwards said. "My hope is that MHA can still survive as an advocacy group."

Foppiano took over the top job at MHA last week after the resignation of John Tote, who had helped lead the group for the past 24 years.

Tote, 47, was named as the new director of mental health for the state Department of Health and Human Services on May 18, but was forced to withdraw Monday after reports that MHA faces IRS liens of more than $1.5 million for unpaid payroll taxes.

The depth of the association's financial woes was not widely known, even to many employees. Tote has said the tax issue was a cash flow problem triggered by late payments from the state, but he characterized the issue as a "hiccup."

This week's memo to employees makes clear that the association's actual situation is more dire, and that it cannot both pay its employees and make IRS payments to satisfy the liens.

"We have looked carefully at our current financial situation and have determined that we cannot fully meet our payroll obligations," said the memo, which was not signed by an individual. "We want you to receive your checks (in this case a portion of your check) on time; and we want the checks to clear your bank or for you to have the ability to cash them in a timely manner."

The memo said MHA management hoped this would be the only pay period for which salaries would be halved, but the group's first priority must be to pay off its tax debts.

Tote said Thursday that he could not comment about MHA's current financial health, since he is no longer affiliated with the group. He said that, in general, mental health providers in North Carolina have suffered from government budget cuts and late payments from DHHS, the very agency he had hoped to lead.

"I don't know MHA's current situation, I truly don't," Tote said. "But in regards to cash flow situations like this, I have seen this from providers across the state. This is what happened when you saw the catastrophic collapse of agencies across the state in the last five or six years, because, all of a sudden, the money stops and the expenses go on."

The association's 2007 tax return, the most recent publicly available, indicates more than $25 million in revenue from government fees and contracts.

Tote's compensation

Public records also indicate Tote and other employees were well paid, even as the association struggled financially.

The first liens for unpaid taxes were filed against MHA in 2006, according to records on file with the state. That same year, Tote received $172,573 in salary and another $43,143 in benefits and pension contributions, according to the group's 2006 tax return.

The next year, Tote's salary rose to $181,034, even as the association reported a net loss on its tax return of more than $920,000.

In addition to Tote, at least five more executives at the nonprofit organization were paid total compensation in excess of $80,000.

Some listed as "independent contractors" for the association received more. Dr. Nimesh Shah, a Statesville psychiatrist, was paid $403,328 in 2007, according to that year's tax return.

The 2007 return was not filed with the IRS until June 2009, and it was not immediately clear Thursday whether MHA has filed returns for 2008 or 2009.

Asked about his compensation, Tote said the MHA board, not he, set his salary. But he was worth the money, he said, even as the group was losing money.

"Because of funding cuts and staff reductions, more was put on me as chief executive," Tote said. "And while we may have been losing money, there was more expected of me."

John S. McKee III of Lumberton, who is chairman of MHA's board, could not be reached for comment Thursday.

In an interview last week, however, McKee said Tote did not tell board members about the tax problems until about a year ago.

"He made some poor decisions, he got in trouble, we're working out of it," McKee said.

Staff writer Lynn Bonner contributed to this report.

michael.biesecker@newsobserver.com or 919-829-4698

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