Collapse of AIDS Service Unit Raises Questions About Its Books : Charity: Officers of Northern Lights cannot explain why financial disclosure statements are not on file.

When the T-shirt by Madonna fetched a bid of $4,200 and the Hanes-ala-Liz went for $4,000, the crowd was impressed. Northern Lights Alternatives, a small AIDS service agency, seemed to have struck gold last December with its novel auction of 175 extra-large Hanes T-shirts decorated by the Hollywood glitterati.

But four months later, Northern Lights has shut down its Los Angeles operations because of financial troubles. Questions persist about what went wrong with the social services outfit that provided the community’s only free clinical counseling service for homebound AIDS patients.

The recession and stiff competition for AIDS donations were at the root of Northern Lights’ troubles, agency officers said. But they acknowledged that they cannot explain why financial disclosure statements are not on file with the state Department of Justice and have not been located in Northern Lights’ headquarters on Wilton Place in Hollywood.

Under state law, groups that qualify for tax-exempt donations are required to file those financial statements and make copies available for inspection in their offices.

Jackie Black, who chairs Northern Lights’ board of directors, said the board was shocked last week when it learned the depth of the financial woes shortly after Executive Director Rodney Scott announced that he was resigning to work for an Orange County-based AIDS agency.

The board decided to close Northern Lights and find other agencies willing to take on its counseling services and weekend-long “AIDS Mastery” workshops. Its goal is to disband Northern Lights with a minimum of disruption to its clients, Black said.

An accountant had been hired to audit the agency’s books “to try to find out exactly where we are,” Black said. Northern Lights has every intention of paying its debts, she said.

Scott, Black and another board member, Dr. Robert Jenkins, said they were unaware that public financial statements were missing until a Times reporter asked to see them.

“We are overwhelmed with new information that we are trying to digest,” Black said. “So far we haven’t had any explanation, satisfactory or otherwise. . . . Just when we think we get a handle on it, some new piece of evidence comes to our attention and it starts all over.”

“We want to know what happened too,” Jenkins said. “That’s why we took the book to an outside accountant.”

Jenkins, frustrated by a lengthy search for the financial statements, said he felt “dumped on and duped.” He and Black faulted Scott for not informing the board of the agency’s financial troubles in a more timely manner.

In an interview Wednesday, Scott blamed the recession for cash-flow problems, noting that some corporations and private parties were unable to deliver pledged donations.

The celebrity T-shirt auction and dinner at the Pacific Design Center--which reportedly drew 500 guests at $50 per plate--was not as successful as it appeared because of cost overruns, he said. In some instances, top T-shirt bidders failed to make good on their bids.

Scott, who will soon join the Orange County-based AIDS Services Foundation as executive director, said he was baffled that financial disclosure statements are not on file with state authorities. He said he is confident that finances were handled properly. The agency, he said, had an annual budget of about $200,000 and five full-time employees.

Scott said his resignation was among the factors that prompted the board to consider shutting down Northern Lights “instead of going to the community again and again for more money.” The board, he said, decided that it was better to “farm out” services to more financially secure agencies instead of continuing to compete with more than 25 nonprofit groups devoted to the AIDS crisis.

Donations have become so scarce, AIDS agency directors say, that several other small nonprofit groups could collapse under the strain of the recession.

“There is a natural shakeout which unfortunately happens in major economic recession,” said Torie Osborn, executive director of the Los Angeles Gay & Lesbian Community Services Center, which operates one of the region’s largest AIDS service programs. “They’re probably not the last organization that’s going to face restructuring, being absorbed by another organization or folding.”

Founded by spiritual counselor and activist Sally Fisher, Northern Lights occupied what Osborn called “a small but critical niche” in Los Angeles’ network of AIDS services. In addition to its counseling for homebound patients, its headquarters, called Hernandez House, was known as a comfortable meeting place for persons with HIV, their loved ones and care providers.

Fisher said the AIDS Mastery workshop will continue to be offered through another agency.