Eagle Tribune (Massachusetts) - by Keith Eddings

The Greater Lawrence Community Action Council misspent up to $224,110 in federal grants over a three-year period, including $57,282 it paid to a former executive director who was spending workday afternoons at the Elks Club on Andover Street, federal auditors said last week.

The federal audit, which follows a similar but broader investigation by the state, wraps up an anguished year at the $24 million anti-poverty agency that began with a series of Eagle-Tribune stories revealing fraud, mismanagement and nepotism inside its Essex Street headquarters. Since then, the former executive director, his top aide, a program director and 11 members of the board of directors have resigned, and more than 40 reforms have been implemented or are in the works.

"GLCAC Inc. is a far different organization than it was in April 2011," Christian Dame, the agency's interim executive director, told the board Feb. 23. "... we have emerged from this dark cloud."

The federal audit holds the state agency that funneled the federal grants to GLCAC responsible for their misappropriation and asks the state to return $157,169 to the federal Department of Health and Human Services.

The bill could grow to the full $224,110 if GLCAC is not able to account for another $66,941 in federal aid that auditors said was improperly documented.

GLCAC already has said it will reimburse the state for whatever it repays to the federal government.

Besides paying former Executive Director Philip Laverriere for the hours he spent playing video poker and card games at the Elks Club, federal auditors found the agency could not justify the salaries it paid to three other employees, including a $53,935-a-year program coordinator who was spending half the workday at another non-profit agency. The audit did not identify the three employees.

The auditors also found GLCAC overbilled the state $7,642 in rent reimbursements and provided $1,383 in tax consulting services to individuals who made too much to qualify for the service.

"These deficiencies occurred because GLCAC did not have adequate policies and procedures and related internal controls to ensure that it claimed costs that met the terms of the grants and applicable federal requirements," the auditors said.

The auditors recommended GLCAC to update its timekeeping and payroll systems and ensure the rents it pays "are supported by current space studies" and that only eligible clients receive services.

The recommendation that GLCAC update its timekeeping and payroll systems overlaps with one of the 40 reforms the state Division of Housing and Community Development demanded at GLCAC last year after its own investigation.

DHCD in April issued a scathing critique of GLCAC's management, ordered the reforms and a raft of resignations and designated it a "troubled agency," which could have led to a loss of its state and federal funding.

The two governments provide about 98 percent of GLCAC's $24 million budget this year, which is down from about $30 million last year.

At the GLCAC board meeting Feb. 23, Dame reported that all but four of the reforms are in place. One of the four left on the to-do list is the new time documentation system, which Dame told the board would be completed in a few months.

Dame also told the board that the federal audit found "no malfeasance or missing monies."

"Unfortunately, because of administrative errors, we will have to return some funds to the state government, which we have agreed to do over two fiscal years," Dame said. "The payback represents a painful but survivable penalty for us."

Dame could not be reached yesterday.

In a letter attached to the federal audit, he concurred with all of the audit's findings and said he would implement the reforms it suggested. He said GLCAC would repay the $157,169 in misspent funds and "determine the correct allocation" of the $66,941 that was improperly documented.

Mary-Leah Assad, a spokeswoman for DHCD, said it will remove its "troubled agency" designation from GLCAC once it has reimbursed the state for the money.

Where GLCAC would find the money to repay the state could not be learned Friday. However, the DHCD in April directed it to "initiate (a) legal assessment of possible fraud violations by the former executive director to assess possible liability for repayment of state or federal funds."

In June, Dame asked county, state and federal prosecutors to consider charging Laverriere with defrauding the agency out of his paychecks.

Prosecutors have declined to comment on the request.

Laverriere collected up to $144,641 in salary, bonuses and travel allowances annually.

His lawyer, Anthony DiFruscia, said Laverriere put in the time required of him and would oppose any effort to make him pay restitution.

"Any CEO is hired to do the job," DiFruscia said. "He doesn't punch a time clock, so I'm curious about what records were submitted to document that he was not working 40 hours. I don't see any requirement in Phil's contracts that indicated there was a 40-hour work week."

Laverriere claimed he was working 40-hour weeks in federal tax documents he signed for GLCAC.