Supe. Stefani resigns from behavioral health board after raising questions over finances, PPP loan

Supervisor Catherine Stefani has resigned from the Behavioral Health Commission after calling for an investigation into the body’s fiscal agent for alleged financial mismanagement and later learning it may have also inappropriately secured a federal Paycheck Protection Program loan, the San Francisco Examiner has learned.

Stefani began to serve on the Behavioral Health Commission as a Board of Supervisors appointee in January 2019, when it was then called the Mental Health Board. These bodies were established in counties throughout California under state law in 1957 to advise on mental health services.

On April 20, Stefani became aware of “allegations of financial mismanagement” by the commission’s nonprofit fiscal agent, the San Francisco Mental Health Education Funds, she wrote in a May 12 resignation letter obtained by the San Francisco Examiner.

The nonprofit contracts with the Department of Public Health to receive public funds annually to pay for the administrative costs and two staff salaries of the Behavioral Health Commission along with the expenses of behavioral health training workshops attended by city employees and nonprofit staff. The City paid the nonprofit $315,205 last fiscal year, according to records with the City Controller’s Office.

Stefani said her concerns were with expenses that “may not have been invoiced properly,” according to a separate letter she sent April 21 to Dr. Grant Colfax, head of the Department of Public Health, and to the Controller’s Office, which the Examiner also obtained. She wrote that commission “staff have indicated that expenses and salaries have not been invoiced or paid correctly.”

Amid questions about the finances, Stefani later learned that the nonprofit “applied for and accepted a Paycheck Protection Program loan from the Small Business Administration, despite my understanding that no employee of that organization faces reduced or eliminated employment,” she wrote in her resignation letter, suggesting it may have been obtained inappropriately.

The City is now investigating.

“DPH is assisting in the investigation of this matter and can’t comment while that investigation is ongoing,” Department of Public Health spokesperson Jenna Lane told the Examiner Wednesday.

“I have not improperly managed the nonprofit,” Brooke said. “The invoices were a bit late.”

She added that now “they have all gone in.”

She said she submitted invoices on time from July through September. “But I did not submit October, November, December in January when they should have been submitted,” she said.

Brooke, who has served as executive director since 1999, declined to provide a specific reason why. “Just there was too much going on at the time,” she said. “It was personal.”

David Elliott Lewis, who has served on the Behavioral Health Commission and is a board member of the nonprofit, told the Examiner Tuesday that he and other board members have had questions about the nonprofit’s handling of funds.

“I know there’s concerns about financial issues,” Lewis said. “I have unanswered questions too.”

According to Lewis, questions about finances surfaced when in late 2019 and into 2020 Brooke inexplicably fell behind on invoicing The City for expenses that led to little to no money coming in to pay for salaries and administrative expenses.

“There was actually no money coming in for at least, my understanding, the last quarter of 2019 and the first few months of 2020,” Lewis said. “That was the problem.”

He also said it was not clear what “caused her to fall behind on her invoicing.”

Amid the invoicing problems, other issues were raised by some board members, according to Lewis.

Brooke acknowledged that some board members confronted her in March about $42,000 that The City had provided as an “advance” for expenses. Brooke said some board members accused her of using that money as a “personal loan” for her own expenses.

“They were alleging essentially that I personally borrowed $42,000,” she said. “They thought that I had taken a personal loan from the account, which I had not.”

Brooke said that the $42,000 was a standard advance under the city contract to pay for expenses and that “it was not misused.” “It was used for legitimate expenses,” she said, adding that it was used from July 2019 to January 2020.

Brooke said she was unaware of Stefani’s letters until asked about them by the Examiner, and suggested they were based on bad information from nonprofit board members “who seem to have trouble, some of them, understanding the process.”

“There is a lot of different ways of framing things, particularly when you don’t really understand the contracting process,” Brooke said.

In response to Stefani’s letters, Brooke said, “I don’t feel there’s been financial mismanagement and there has not been contract noncompliance either.”

Lewis said he and other board members had planned to go into the office to examine the credit card and banking statements, but then the shelter-in-place order went into effect on March 17, delaying that effort.

“I have no evidence of impropriety,” Lewis said. “The only thing that happened was lack of job performance in terms of submission of invoices. But I have no evidence of anyone acting in bad faith.”

However, Lewis said “further investigation is warranted.”

“The books need to be audited,” he said.

Despite these questions, Lewis said the board decided to apply in April for the PPP loan to pay for the salaries of Brooke and Loy Proffitt, the administrative manager for the commission. Proffitt did not return requests for comment. Salaries and benefits for Brooke total about $7,000 a month and $5,000 a month for Proffitt, according to Brooke.

Lewis said he voted with other board members to apply for the PPP loan “under the argument the accounts had run so low that Helynna and Loy were not being paid.”

Brooke said that she and Proffitt did go without pay for “a part of February, March and April” because “we didn’t have enough funds in the account.”

“We saw a need for an infusion of cash,” Lewis said.

But not every board member agreed. Lewis said that board member Terry Bohrer argued against the loan and threatened to resign if they got it. When they did, Bohrer did, in fact, resign, according to Lewis. Among Bohrer’s arguments, he said, was that “the PPP loan should go to nonprofits that need it more badly and we should just wait it out.”

Bohrer did not return requests for comment.

“I don’t think there was anything underhanded that happened here,” Lewis said.

Brooke said the decision to apply was “a precautionary measure” and it appears they may not need it after all. She said they secured a $25,625 PPP loan.

“Now if we don’t need it, it will be paid back. It’s likely we don’t need it. The invoices that were submitted will be able to cover,” Brooke said.

Asked for more details about giving the PPP loan back, she said, “I’m just figuring that out.” Brooke added that she will have a “call within a week” with the PPP loan administrators.

Stefani wrote that when she first heard of the financial mismanagement allegations she “immediately” consulted with the city attorney and sent the letter to Colfax and the Controller’s Office “detailing my concerns and asking for an independent review.

She noted in her letter to Colfax that the city charter provision that prohibits supervisors from interfering with city department contracts barred her from investigating further and that she has no firsthand knowledge of the administration of the contract.

“While I have served as a member of the commission, I do not have access to the records of the commission’s fiscal agent,” Stefani wrote in her resignation letter. “Without access to that information or further transparency, neither I nor members of the public have adequate insight into that organization’s recent activities.”

“I do not believe the current structure of the commission best serves the residents of the city and county of San Francisco,” she continued in the letter. “As a result, I cannot in good conscience continue to serve on the Commission and resign my seat effective immediately.”

Asked what she thinks city investigators might find, Brooke said: “Nothing improper.”

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