AIDS Project Ex-Director Cleared of Funds Misuse

After an independent investigation of finances at the San Diego AIDS Project, the organization’s officials have concluded that, with the exception of 12 “undocumented” checks, there appears to be no misuse of funds by former director Hal Frank.

Frank, who founded the program and has headed it since 1983, resigned as its executive director in December, citing a drug dependency that compromised his work at the project. He also acknowledged that he used money from another AIDS group to buy a drug that he believed might be useful for AIDS patients.

The investigation covered expenditures made by the project from 1984 to 1986, said Scott Erlich, chairman of the board of directors’ finance committee. During that period, approximately 600 checks were written by the project. Erlich said the investigation, by the independent accounting firm of Peat, Marwick & Mitchell, indicated that “there were no improper expenditures, although the documentation supporting the expenditures is sometimes weak, from an accounting perspective.”

A report issued by Peat, Marwick & Mitchell questioned 12 undocumented checks written by the project to the Education Experience Research Institute (EERI), a nonprofit group founded by Frank that provided money to the AIDS Project before it received state funding.

The institute conducts “love and healing” workshops for AIDS patients around the state. Most of its money comes from private donations and fees for the workshops, AIDS Project officials said.

Erlich said that subsequent conversations with Frank had determined that eight of the checks were “legitimately issued in payment for goods or services rendered to the project.” The four remaining checks, which total $5,614, are still being investigated by the board, Erlich said.

Late last year, some board members alleged that Frank may have used project money to buy drugs. The accountants’ report indicated that a $1,960 purchase by Frank of the drug MDMA, known on the street as Ecstasy, had been made with EERI funds.

A statement released by the AIDS Project’s board of directors at a meeting last week said that Frank had made “some purchases” without board approval and had “mismanaged the administrative task” of the project. It also alleged that Frank had misrepresented his educational credentials by calling himself a clinical psychologist. Whether Frank has a Ph.D. in psychology is still in dispute.

Reached at his home Friday, Frank said he would not comment on the specifics of the investigation or on the nature of his credentials.

“I made mistakes and probably did not use proper judgment all of the time,” Frank said. “But we are living in desperate times and probably will be for a long time. All I wish for now is that we can get this behind us, and that both the project and myself can move forward to what we should be doing, which is fighting this disease.”

Frank said that he would continue to work with AIDS Projects in San Francisco and Santa Barbara, but said he was unsure if he would stay in San Diego.

The results of a state Department of Health Services audit released earlier this month found no “direct mishandling” of nearly $40,000 in state funds allocated to the project in 1984-85. Frank Leon, regional manager of the agency’s Audit and Investigations Unit, said that only salary costs and operating expenses were billed to the state during that period.

Almost 90% of the state grant was used for salaries and wages for three positions: $12,600 for the project director; $10,500 for the media specialist coordinator, and $10,500 for an outreach education specialist. The rest of the state grant was used for operating expenses, Leon said.

Leon said that state auditors did not pursue the amounts spent once it was determined that the money was billed to the state as salaries.

“In other words, we did not look at how Frank used the money after he got that $12,600,” Leon said. “If a person puts in an honest week’s work and then goes out and buys drugs, there is not much we can do about that. Obviously, if the project director was still there and this became a continuing thing, then the state would have something to say about it.”

Both the state and independent investigations cited “sloppy and sometimes non-existent” bookkeeping methods as contributing to confusion over how the project’s money was spent. L.C. Miccio-Fonseca, AIDS Projectacting director, said that new accounting procedures have already been implemented to “alleviate deficiencies.”

Miccio-Fonseca also said that negative publicity concerning the investigations had caused donations to the project to drop about two-thirds from the previous year. In 1985-86, the project received about $87,000 in donations, but a large portion of that was a single private grant, officials said.

In fiscal year 1985-86, the project received a state grant of $235,000. Records indicate that the project has used about half of these funds. Leon said state auditors did not recommend that funding cease for the project because “they got rid of the the project director and they did hire an outside CPA.”

James Stoddart, chairman of the AIDS Project’s board of directors, said that receiving approval for state funding in 1987 “might be a mild problem, but we are attempting to demonstrate in every way that we are confronting these issues.”

State health officials and those within the AIDS Project have attributed many of the financial difficulties to the “growing pains” of an organization that began in 1983 with a handful of volunteers providing services to 20 AIDS patients and that has evolved into its present position as San Diego County’s major source of counseling and education on the disease.

“A lot of it is the growing pains of an organization that has had a large infusion of money in a relatively short period of time,” Leon said. “You also have to look at how quickly this disease has spread and the numbers of people affected. They just were not prepared.”

Acquired immune deficiency syndrome, which scientists believe is caused by a virus that destroys the body’s immune system, has primarily affected homosexual men, intravenous drug users and recipients of infected blood products.

Besides educational programs, the project offers support services such as food, shelter and legal referrals, transportation services, and an in-house assistance program called the Buddy Program to persons with AIDS, those with AIDS Related Complex (a group of symptoms associated with the disease but not the disease itself) and their friends and family members.

San Diego County ranks third behind San Francisco and Los Angeles counties among California counties reporting cases of AIDS. Since 1981, there have been 180 reported cases in San Diego, and 91 people have died of the disease.