DURHAM — The Civitas Institute, a right-wing Raleigh foundation, claims that mismanagement by a Durham nonprofit cost almost 250 needy children their child-care subsidies in December.

Those responsible for managing the subsidies, though, say the claim has little or no basis in fact.

"It's not based on anything," said Tracy Zimmerman, spokeswoman for North Carolina Partnership for Children, who called the Civitas claim "outrageous."

In November, the Child Care Services Association, which administers a Smart Start scholarship program with an annual budget of about $3.4 million, informed about 200 families that their subsidies would end Dec. 17.

Smart Start is a state program that operates through local agencies to promote and serve healthy early-childhood development. Durham's Partnership for Children is the local Smart Start affiliate, and contracts with Child Care Services to administer the Smart Start scholarships.

When it announced the subsidies would end, Child Care Servies said it was due to funding cuts and children remaining in the program longer than expected overwhelmed its finances. In a report released this morning, however, Civitas claims that the association's overspending used up almost two-thirds of the budget in the first half of the fiscal year 2010-11.

"Serious questions remain," the Civitas report says, "as to how such a serious structural deficit could have gone unnoticed or unreported."

Zimmerman said the state office knows of no mismanagement and that regular examinations of the association's performance gave no indication it was not operating properly.

Civitas claimed its report was based on unspecified "internal documents" but also said the association refused to give details when requested.

Melanie Busbee of Durham's Partnership for Children, the local Smart Start agency, also said Civitas was "incorrect." She and Colby Falconer, development manager at the Child Care Services Association, said their agencies would make a formal response tomorrow.

Smart Start is a statewide network of agencies promoting healthy early-childhood development with funding from government and private grants.

Child Care Associates manages the Smart Start scholarships by arrangement with Durham's Partnership for Children. DPFC gave the association good marks for performance in 2009-10, its first year managing the subsidies.

Previously, they were handled by Durham County Social Services. Sharon Hirsch, assistant DSS director, said that Partnership for Children made the change after issuing an open request for proposals to manage the Smart Start scholarships in 2009. DSS responded but was not chosen to continue, she said.

"We were disappointed," Hirsch said, and referred questions as to the reason why to Partnership for Children.

The 2009-10 budget was $3.67 million, according to the DPFC report; 587 children received Smart Start scholarhips that year. The subsidies, supposed to continue for 12 months, were provided for children in infancy up through age five.