A nonprofit drug treatment foundation set up by freshman Rep. Frank Ballance has been “riddled with conflicts of interests and financial improprieties,” including payments to the North Carolina Democrat’s relatives and political supporters, according to an audit by state regulators released Wednesday.

The report examined hundreds of thousands of dollars in state grants given to the John A. Hyman Foundation, a charity set up to provide substance abuse counseling. The group, chaired by Ballance, ceased operations last month amid revelations about its bookkeeping and alleged financial improprieties.

North Carolina Auditor Ralph Campbell said he would recommend that the foundation return more than $238,000 that was not used on substance abuse treatment and counseling.

“I agree errors were made,” Ballance said in a statement that characterized the failure to file financial and tax reports as “administrative oversights.”

“My intent and the intent of the Foundation has always been to provide, sponsor and sustain programs directed at addressing and or preventing substance abuse, and lifestyle choices that put our youth at great risk. I believe the public monies have always been used for the public good for which they were authorized,” Balance added.

“The primary task before me now is to continue representing the people of the 1st Congressional District and I look forward to doing so for many years to come. As stated earlier, we will work diligently to clear up all remaining issues with JAHF,” the lawmaker said.

The highly critical report came a day after The Associated Press reported that the FBI has begun an investigation of the charity.

The audit report said the foundation received more than $200,000 a year in state grants since 1994, a period during which Ballance served in the state Senate and oversaw spending as a member of the appropriations committee.

Interviews with grant recipients indicated that some used the funds they received for drug and alcohol treatment and prevention projects, while others used the funds for projects that had no apparent connection to substance abuse, the audit said. Tracking the money proved difficult because few financial records were maintained and the foundation did not file required state and federal tax returns, the report found.

Auditors also revealed that the foundation paid Ballance’s daughter $5,000 for work that was not performed. And the nonprofit provided a grant to an organization that employed Ballance’s mother, the audit stated.

In addition, the foundation wrote an undocumented $35,000 check for rent to a church where Ballance served as chairman of the board of deacons.

See Thursday’s edition of Roll Call for more on this story.