Laurel Highlands Foundation Inc., a nonprofit based in North Versailles that operates group homes and provides services for the mentally disabled, is under county and state scrutiny after allegations surfaced of possible embezzlement.
The state Department of Public Welfare confirmed Thursday that it is investigating.
"We have been made aware of the financial issues and we have an open investigation," welfare department spokeswoman Stacey Witalec said.
Laurel Highlands Foundation earns about $6 million a year in state contracts covering 43 Allegheny County residents, according to Marc Cherna, director of the county Department of Human Services.
Mr. Cherna said his department, which oversees the state contracts, was alerted Wednesday to allegations of possible fraud at the nonprofit.
Auditors Thursday were at the group's headquarters, Mr. Cherna said.
"We're out there today and we'll be continuing to go out until we're done," Mr. Cherna said Thursday. "We want to see what they've got."
The Allegheny County district attorney's office also confirmed Thursday that it had been asked to look into the situation.
Prosecutors received a request last month from the North Versailles police department to investigate a report of theft at the organization.
Mike Manko, the DA's spokesman, would not comment on any specifics.
North Versailles police Chief Vincent J. DiCenzo said Laurel Highlands Foundation employees filed a theft report Jan. 4.
He declined to provide details but said after some investigation he passed the case along to the district attorney's office.
Prosecutors are awaiting the results of a independent forensic audit looking at the nonprofit's books before deciding whether to move forward with an investigation into possible criminal wrongdoing.
Paul Dumm, the group's former executive director, said he and the Laurel Highlands Foundation controller, Cher Moser, made the report to police.
Mr. Dumm said the controller became suspicious of checks made out to an employee over "a number of years." He declined to say how much money was involved.
"We took appropriate action immediately," Mr. Dumm said. "We were aware of an issue and then brought it to everybody's attention. We brought in a forensic accountant. We discharged that person. And we were looking into the vastness of that."
Mr. Dumm resigned Tuesday, but he said it was for a matter unrelated to the alleged financial irregularities.
In a letter submitted to the group's board, Mr. Dumm described a stressful and "hostile work environment" in which he claimed that the board's president violated its bylaws and ethics policies and refused to communicate with him. He also accused the board of not enforcing those bylaws and policies and said he felt as if his hands were tied while working for the nonprofit.
Mr. Dumm, 57, of North Huntingdon, would not go into specifics. He spent about 18 months running Laurel Highlands Foundation.
"I thought I did an excellent job," Mr. Dumm said.
A man identifying himself as an administrator who answered the phone Thursday at Laurel Highlands Foundation said he did not know who was in charge following Mr. Dumm's departure.
Mr. Dumm's name was erased Thursday from the group's website and there was no listing for executive director.
Board President John E. Gera did not return several messages. Other board members could not be reached.
Mr. Cherna said he was aware of the leadership turmoil at the nonprofit and the situation would be among the things his auditors would examine.
Services to clients do not appear to be affected by the group's internal problems, Mr. Cherna said.
Jonathan D. Silver: firstname.lastname@example.org or 412-263-1962.