Raleigh, N.C. — The same tax issues that scuttled a state position for the former director of the Mental Health Association in North Carolina have now forced the organization to shut its doors.

Christie Foppiano, interim executive director of the Mental Health Association, issued a statement late Friday saying that the organization couldn't continue to operate because of its shaky finances.

Association officials tried unsuccessfully in recent days to negotiate new lines of credit to continue operating, said John McKee of Lumberton, chairman of the organization's board of directors.

"We're struggling right now real bad. We're in trouble," he said Wednesday.

Even without the bank loans, the Mental Health Association would have been limited to an advocacy role.

The Council on Quality Leadership, a national organization that evaluates human services groups, withdrew its accreditation of the Mental Health Association this week, according to Leza Wainwright, director of the state Division of Mental Health, Developmental Disabilities and Substance Abuse Services.

The loss of accreditation meant that the Mental Health Association could no longer provide services that are covered by Medicaid, Wainwright said.

She said she is confident that other providers will fill the gaps in service left by the Mental Health Association, and Foppiano said in her statement that the group has been working with agencies like The Arc of North Carolina and Easter Seals in recent weeks to transfer its management of services.

The Mental Health Association bills itself as the oldest and largest nonprofit in the state that serves people with mental illness. It has 27 affiliates statewide that provide resources for consumers and professionals in the treatment and prevention of mental illness, according to its website.

Almost $1.5 million in federal tax liens have been filed against the organization in recent years for failure to pay employee withholding taxes. More than $617,000 of the total was assessed in May.

Neither the IRS nor the state Department of Revenue could say if any of that money has since been paid, but John Tote, former Mental Health Association executive director, has said the back taxes had been paid up to 2009.

In May, the tax problems forced Tote to withdraw his name from consideration to succeed Wainwright when she retires on Sept. 1.

Mental Health Association officials said they never tried to hide their tax troubles, noting that they went to the IRS to report the non-payment of employment taxes.

They blamed their financial troubles on state budget cuts and delays in being reimbursed by the state for mental health services. Reimbursements sometimes take up to six months, they said.

At its height, the Mental Health Association had 550 employees and a $26 million annual budget, but state budget cuts in the past two years forced the organization to slash staff and spending.