A local non-profit that oversees taxpayer-funded child care paid nearly $2 million over nine years to a construction company owned by the son of its recently retired CEO, federal tax records show. 4Cs of Passaic County has drawn the scrutiny of state officials for spending on disallowed items, such as the retirement nest egg of the chief executive officer, Mary Ann Mirko. Officials now say they will be seeking $827,643 in reimbursements under two contracts the non-profit had with the state and are continuing to audit earlier contracts.

Representatives of the group defended the spending and said they hope to get a chance to make that point with state officials. Mirko, who retired as CEO at the end of January, said the payments to her sons company were legitimate We put out all of our contracts for bids and we always made sure we got three bids, Mirko said. The lowest bid was my sons.

According to the organizations federal tax returns, 4Cs and its predecessor the North Jersey Community Coordinated Child Care Agency hired Lakeside Carpentry in Wayne as a contractor in all but two years between 2001 and 2009. Lakeside is owned by Roy Mirko.

Mary Ann Mirko said that among the work done by her sons company were renovations to a Paterson building in 2008 where the non-profit was relocating a child-care center. 2008 was when we moved, and we had to do something about the building, she said. We bid out everything over a certain amount.

Federal law requires that non-profits disclose on their tax returns any time they pay more than $1,000 to a member of any executives family or any business owned by a family member. 4Cs reported its dealings with Lakeside but did not disclose the relationship until it filed the form for 2006. It first hired Lakeside as a contractor in 2001.

A spokeswoman for the state Department of Human Services said the payments to Lakeside were not included in the reimbursements sought by the state. The hiring of a company controlled by executives family members would be a subject for review under a new conflict-of-interest clause added to state contracts in October 2009, Nicole Brossoie said. But because Lakeside hasnt been paid by 4Cs since then, the state does not believe that any action will be taken with regard to these [earlier] payments, she said.

More 'disallowed' expenses

Non-profits that do work for the state have come under increased scrutiny by the Christie administration. In April 2010, it issued salary guidelines for social-services agencies with state contracts. Mirko, whose total compensation that year topped $350,000, was one of a handful of non-profit executives in Bergen and Passaic whose pay was high enough to be affected.

And benefits paid to Mary Ann Mirko are at the heart of DHS demand that 4Cs pay back $827,000 of the approximately $70 million it received from state contracts in 2008 and 2011.

On Jan. 24 the state sent 4Cs a letter seeking $148,227 from the 2011 contract $125,000 of that for money it paid into Mirkos retirement fund and $11,827 spent on long-term-care insurance for Mirkos husband and DiNizos wife. The state also wants 4Cs to repay $11,400 in various employees travel expenses.

Brossoie said that the state has also drafted a second demand letter it plans to send to 4Cs seeking $679,416 from its 2008 contract. That includes another $125,000 paid into Mirkos retirement account and a range of other disallowed expenses. In addition, DHS auditors are going back through other contracts with 4Cs to determine if it should seek more reimbursements. The non-profit has been paying $125,000 annually into Mirkos retirement since 2001.

As of September 2009, Mirkos retirement account was valued at $856,252, according to a 4Cs audited financial statement. Mirko said the non-profits board decided to begin the payments then because I had worked for 25 years without a pension. They felt after 25 years they should do something for me. She added that she had earned that benefit.

I put in 35 years there and I never did anything wrong, Mirko said. There is nothing going on that is illegal or immoral. After 35 years, thats not a lot of money. I did devote 35 years of my life to that agency, where I helped thousands of people.

4Cs is the state child-care resource and referral program for Passaic County. It oversees state and federal child-care voucher programs, runs the countys referral service for parents seeking child care, maintains the waiting list of families eligible to receive vouchers, runs a training school for child-care workers and provides a range of other child-care-related services.

It had an operating budget in 2010 of $34.5 million. According to its audited financial statement, all but a few thousand dollars of its revenue comes from state and federal funds. Keith Darragh, chairman of the 4Cs board, said the non-profit is in the process of getting back to the state and trying to understand the basis behind its reimbursement demand. Darragh, who joined the board two years ago, said 4Cs always provides the state with a full budget when its state contracts are signed.

The benefits and salaries of our employees, that detail was always disclosed, he said. By no means were we trying to hide things.

The board chairman emphasized that 4Cs has a good working relationship with the state, and added that he hoped once the organization finds out more details about state auditors concerns, it will be able to show that the expenses in question are legitimate.

Brossoie said state contractors frequently are able to provide additional documentation to justify costs that have been challenged by auditors.

What the auditors identify as unallowable costs can sometimes change through discussions between the state and the agency, she said. As for the 4Cs payments to Lakeside Carpentry, Darragh noted that they predated his tenure on the board and he had not been aware of them. Will it be something I inquire about? Yes, Darragh said.

Email: lipman@northjersey.com