NASHUA — One of the largest social services agencies in Nashua has poor financial controls and is not meeting its contractual duties, according to a review by Attorney General Gordon MacDonald, whose office also called on Harbor Homes to reconsider the “high-end” salary paid to chief executive Peter Kelleher.

MacDonald’s Charitable Trusts Unit made a host of recommendations for Harbor Homes, which contracts with state and federal agencies to provide social service programs in the greater Nashua area. Harbor Homes programs include drug and alcohol treatment, housing for the mentally ill and veterans, and home services for the elderly.

An 85-page report includes back and forth disputes between accountants for both Harbor Homes and the state. Kelleher said the report has some deep flaws and he is disappointed that MacDonald’s office chose to go the route it has.

“Nonetheless, we are working hard to address this, and all of our staff is 100 percent focused on our mission,” Kelleher said on Friday.

Harbor Homes generates an annual revenue of $38 million, yet is facing a number of financial problems, the report found. For example, last year it paid fees for 424 check overdrafts.

“In recent years, it has struggled to maintain sufficient balances in its cash accounts for ongoing operations,” the report says. The report also faults Harbor Homes for redirecting resources among its many programs to cope with cash shortages.

In the previous two years, Harbor Homes has tapped the Nashua city treasury to cover deficits on the Safe Stations program. In 2017 and 2018, aldermen provided an average of $50,000 a year from contingency for Harbor Homes’ Safe Station program.

In February 2018, Kelleher reported a $400,000 deficit in Safe Station. He maintained at the time, however, that the financial crunch would not place the nonprofit agency at financial risk. A fundraising breakfast for first responders helped raise to about $70,000.

In a statement, Harbor Homes said it is a go-to agency that has grown by two-thirds over the last four years, in part because of demands placed on it by programs such as Safe Station, homeless veteran programs and the state’s desire to provide community-based programs for the mentally ill.

“With that growth comes change, and we are actively working to update and improve our organizational infrastructure to streamline our bookkeeping, while simplifying and clarifying internal processes and procedures,” the organization said in a statement.

MacDonald’s office recommended that the board of directors reconsider Kelleher’s compensation package, given combined Harbor Home losses of $851,600 from 2015 to 2018.

Kelleher’s compensation amounted to $417,600 in salary, pension, insurance and other benefits in 2018; $502,200 in 2017; $314,200 in 2016.

“Those amounts place the president on the high end of comparably sized social service organizations in New Hampshire,” the Charitable Trusts Unit wrote.

According to a statement from the board, Kelleher’s contract was based on his ability to manage a growing and complex organization.

In 2017, they signed a five-year deal after extensive analysis of salaries of CEOs at similar organizations.

“Our board members unanimously feel that Peter’s contract represents a cost-effective investment in stewardship, considering his accomplishments and the 37-year commitment he has made as an industry leader,” said the board’s statement.

“The needs in our state have always been great, and today they are greater than ever. This has led to our growth as a non-profit,” Kelleher said in a statement provided to the Union Leader.

Harbor Homes questions the findings, with the final compilation including disputes between accountants. For example, MacDonald’s office notes “continuing financial losses” throughout 2018.

Inaccurate, said Harbor Homes, which notes no losses before depreciation. But, said Charitable Trusts, Harbor homes reported losses on financial statements and IRS forms for 2017 and 2018 as well as weak cash positions.

Harbor Homes acknowledges it is working toward financial benchmarks set by the state: a minimum of 30 days cash on hand and an asset-to-liability ratio of 1.5.