From the April/May 2007 Watchdog Report
Takes Steps to
Its Own Health
American Health Assistance Foundation
(AHAF), the poster charity for related party transactions,
with over $43 million of them during the past eight years,
is reforming. These transactions, which were reported in AHAF's
financial statements, were with fundraising related vendors owned
and operated by family members of the charity's former husband and
wife team of Eugene Michaels, President, and Janet Michaels, Executive
Director. The Michaels were removed from their positions at AHAF
in December 2004, according to this charity's fiscal 2005 audit.
Transactions with the firms owned and operated by family members
of the Michaels were discontinued in fiscal 2006, according to AHAF's
audit of the same year.
AHAF did not completely clean house.
It hired AHAF's former Development Director, Kathleen Honaker, with
22 years of experience at AHAF, as its new Executive Director. She
said that she had worked on major donor fundraising and had no say
over AHAF's direct mail.
AHAF also did not discontinue having
family members in important positions at the charity. Ms. Honaker
said that her son oversees caging operations and building maintenance
at the charity, and that she has no input on his salary or employee
evaluation. According to Honaker this is the only family connection
among AHAF employees, and her son was "grandfathered"
in by the charity's board of directors since he worked there prior
to her becoming Executive Director.
AIP asked Honaker if she was concerned
that her son's oversight of AHAF's contribution processing might
give a bad appearance and compromise the separation of duties among
individuals, which is an essential part of good internal controls.
She said that her son oversees the people managing the money, not
the money itself. There are lots of internal controls such as cameras
to monitor the caging area, reports Honaker. Her son does not physically
work in the area where the donations are being processed but does
lock and unlock the door for the people when they enter and leave
the caging area. About one week after AIP expressed our concern
to Honaker about her son overseeing the charity's caging operation,
she called us to report that she has taken this duty away from her
son and reassigned it to another AHAF employee. She thanked AIP
for questioning this arrangement and said that in hindsight she
now realizes that it created a bad perception.
Ms. Honaker said that she wants the charity
to improve and has no defense and is not proud of AHAF's past. The
charity has discontinued its questionable practice of taking credit
on its financial statements for some research costs of universities
and other institutions that it does not pay for. AHAF, which also
raises money under the names Alzheimer's Disease Research, Macular
Degeneration Research, National Glaucoma Research, and Stem Cell
Research Foundation has improved its AIP grade from "F"
to "D" for fiscal 2006. AHAF said that after March 31,
2007 it plans to discontinue its Alzheimer's Family Relief Program
and National Heart Foundation.