Published: December 02, 2008 11:49 pm      

Area Five Agency under scrutiny

State wants return of funding.

The Indiana Family and Social Service Agency wants the Area Five Agency on Aging to return some of the funding it received in 2004.

Lauren Auld, director of communications for FSSA, said Tuesday the state agency is conducting an investigation into the operations of Area Five, which serves clients in Howard, Miami, Cass and Tipton counties.

“During a routine audit, it was discovered there may be nepotism going on at the agency,” she said. The audit centers around Michael Meagher, executive director of Area Five, whose wife, Connie, and daughter-in-law work at the agency.

Auld said the audit is under appeal and explained there are three levels in the appeal process. She said two levels of the appeal are between the agency and the auditors, and the third is a hearing before an administrative law judge.

“This is a level three appeal,” she said.

The allegations first came under appeal in 2006.

Auld said because the audit is still under appeal, the agency will not release the years being reviewed for possible nepotism and repayment of funds. She also wouldn’t disclose the exact amount to be repaid to the FSSA by Area Five.

According to its Web site, the agency is “dedicated to meeting the needs of the elderly, disabled and disadvantaged members of the communities we serve.”

Area Five has been receiving state funds since 1975, and obtains 95 percent of its operating budget from the state. The contracts signed between the state and the agency spell out state guidelines and outline actions that could lead to allegations of nepotism.

Michael Meagher has worked at Area Five for almost 30 years, and Connie Meagher has worked for the agency for 26 years. The couple married after both were employed by Area Five.

Connie Meagher first changed positions at Area Five in the 1990s, when she was named director of aging. Then in 2003, she was named compliance officer, reporting directly to her husband in both positions.

FSSA said the investigation centers around a period of time in 2003 when Connie Meagher reported directly to her husband as the agency’s compliance officer. At that time, she was paid directly with taxpayer funding.

In 2005, she was named assistant director of human resources and now reports to the human resources director.

The state’s nepotism rule prohibits directors from hiring close relatives as subordinates. The FSSA determined that once Connie Meagher changed positions in 2003, she was no longer considered grandfathered in as an employee prior to her marriage to the executive director.

Michael Meagher said Tuesday the investigation is the result of a 2004 audit, and the request for repayment has been under appeal since 2006.

“We don’t agree,” Michael Meagher said of the FSSA decision seeking the repayment. “Our attorney has recommended I not comment so as not to jeopardize the appeal.

“This is not a new issue to the agency. The FSSA has not questioned the expenditures from 2005 and 2006.”

He said no date has been set for when the agency’s appeal will be heard by administrative law judge in Indianapolis.

According to Guide Star, a Web site that tracks non-profit corporations, the Area Five Agency operated at a deficit in 2004, 2005 and 2006 in reports filed with the Internal Revenue Service.

The agency operated in 2006 at a $406,502 deficit, the deficit in 2005 was $438,163, and in 2004 was $321,946.

“We’re in the black now,” Michael Meagher said. “Our investments were down for those three years. We invest in services in the communities we serve.”

He said Area Five currently has cash reserves of more than $5 million.

For the period from 2004 through 2006, the agency spent between 42 percent and 46 percent of its revenues on salaries and benefits.

Of the $10.7 million spent in 2006, a total of $4.5 million was spent on personnel costs. On the 2006 report, Connie Meagher’s salary of $42,305 and Bobbi Jo Meagher’s salary of $28,644 were listed under a heading of “disqualified person” along with $11,000 paid to board member Mike Spear as payment for selling an agency-owned property.

Michael Meagher said he didn’t know what the term “disqualified person” meant.

The agency spent $5.2 million of $11.1 million in 2005 on salaries and benefits, and in 2004, the amount spent on personnel costs was $5.1 million of $11.1 million spent.