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Auditor wants takeover of special-needs agency

She recommends outside receiver

Bump found collaborative officials racked up $4.3 million in credit card charges for alcohol, golf fees, and more. Bump found collaborative officials racked up $4.3 million in credit card charges for alcohol, golf fees, and more.
By Michael Rezendes
Globe Staff / August 10, 2011

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State Auditor Suzanne M. Bump called yesterday for the appointment of an outside receiver to take control of an embattled public agency for special-needs children after her office found that more than $30 million may have been spent inappropriately - three times as much public money as earlier reports have estimated.

Bump’s auditors found that the Merrimack Special Education Collaborative; its longtime leader, John B. Barranco; and others spent inappropriately on salaries, inflated rents, and pension fraud, as well as luxuries such as alcohol, golf fees, and country club outings.

A draft of her report, a copy of which was obtained by the Globe from a source outside the auditor’s office, also said that collaborative officials actively obstructed her investigation, preventing her from talking to some employees and, in one instance, failing to turn over documentation for $2.5 million in expenses.

In a letter to Education Commissioner Mitchell D. Chester, Bump said that her audit of the Billerica-based collaborative found such serious lapses in “governance, management, accountability and transparency’’ that an immediate state takeover is called for.

“It is clear to me that nothing less than [state] controlled receivership of this entity will provide the governance and fiscal controls necessary at this juncture,’’ Bump wrote in the Aug. 9 letter, which was also obtained by the Globe.

Bump’s letter follows accusations by the state inspector general that Barranco siphoned more than $10 million in taxpayer money from the collaborative to a related nonprofit organization, where he used the money to cover inflated salaries and benefits for himself, a former girlfriend, and a circle of associates.

Thomas E. Lent, a lawyer representing the collaborative, declined to respond to Bump’s call for an outside receiver or the specific findings in her audit, pointing out that the collaborative has until Thursday to respond formally.

However, Lent said that six of the collaborative’s 10 directors were named within the past year and that the board has been seeking to address criticisms leveled by Gregory W. Sullivan, state inspector general, as well as Bump.

“The current members of the board of the collaborative do appreciate the efforts made by the office of the state auditor,’’ Lent said. “They have already been working on several recommendations made within her report and intend to respond to the draft audit as invited.’’

The lawyer representing Barranco had declined to return recent telephone calls from the Globe.

Bump’s call for the appointment of a receiver also follows a Globe report that the collaborative’s co-executive directors, Donna Goodell and John Fletcher, are being placed on administrative leave and that a federal grand jury is investigating possible corruption at the agency.

Chester was unavailable for comment yesterday, but his spokesman, JC Considine, issued a statement, saying, “We have not yet seen the audit, but continue to be extremely concerned by reports of this deep betrayal of the public trust. We will continue to work closely with the auditor, the attorney general, and other state agencies as part of the coordinated investigation into the practices of [the collaborative] and look forward to reviewing the auditor’s final report.’’

Considine could not say whether Chester believes he has the legal authority to name a receiver and wrest control of the collaborative from its board of directors. “We are still reviewing what options would be available to us,’’ he said.

The collaborative, a consortium of 10 school districts north of Boston, provides academic, therapeutic, and vocational services to about 500 children each year from school districts in Massachusetts and New Hampshire. It also delivers similar services to about 200 adults referred by Massachusetts social service agencies.

Bump’s audit, which largely covered 2008 to 2010, also said the collaborative may have short-changed students by failing to hire qualified instructors. “During our audit period, only 30 percent of [collaborative] educators were fully licensed,’’ the audit said.

Bump would not comment on her findings because the audit report is a draft and, under standard auditing practices, the subjects of an audit are given 10 business days to respond before the audit is made public.

Bump found that collaborative officials had racked up $4.3 million in credit card charges for alcohol - which Bump said is prohibited by state law - as well as country club outings, golf fees, entertainment, and personal transportation through the use of 17 credit cards. The collaborative had 190 full-time employees and annual revenue approaching $20 million in the fiscal year that ended June 30.

Bump’s auditors said the collaborative failed to establish adequate policies and controls on the use of the credit cards, a task that may have been impossible given that “the very managers responsible for developing and implementing such controls had incurred or approved many of the questionable transactions.’’

Those managers included Goodell and Fletcher, who used their credit cards for nearly $104,000 in questionable charges, according to the audit.

Although the audit does not name Goodell and Fletcher - standard practice in state audits - it cites numerous instances in which the two used their credit cards to cover lunches, dinners, golf fees, and personal transportation inappropriately.

One of the two credit cards was used for 37 golf-related charges totaling $5,735, the audit said. In addition, one of the credit cards was used to cover $4,576 in personal vehicle expenses, primarily gasoline, even though the co-executive director using the card received a $500 monthly travel allowance for which documentation was not required, according to the report. It was not possible to determine which co-executive director used which card.

The 71-page audit also cites collaborative board members for a questionable non-credit-card expense in 2009, when the agency covered a $142 charge for 30 pounds of swordfish purchased for a director’s cookout.

The audit concludes with a recommendation that an outside receiver be named to take control of the agency.

“Given the cumulative, serious and long-term nature of the problems,’’ it said, “we believe that immediate outside intervention, such as the appointment of a receiver, may be warranted.’’

Michael Rezendes can be reached at rezendes@globe.com.