The Wahiawa elderly daycare center that misused $7.9 million in federal grant money refused to cooperate with federal investigators, according to a report from the U.S. Department of Housing and Urban Development.

HUD’s report details violations that trace back through three administrations of Honolulu leadership, beginning when former Mayor Jeremy Harris was in office. The nonprofit at the center of the investigation, ORI Anuenue Hale, Inc., has received the most in federal housing grants of any other program. ORI has not returned Civil Beat’s repeated requests for comment.

“The issue now will be: Will ORI play ball?” HUD spokeswoman Gene Gibson told Civil Beat via phone from San Francisco Wednesday morning. “Will they work with the city? It’s really now between the city and ORI to deal with those compliance issues by the (June 27) deadline. If not, they need to pay the American taxpayer back.”

As Civil Beat reported Wednesday, HUD informed Honolulu Mayor Peter Carlisle that the city would have to pay back $7.9 million unless it takes “immediate corrective action” to bring ORI back into compliance.

Gibson says that similar noncompliance issues have “come up before” in other cities, but she is also clear about how serious Honolulu’s violations may be.

“HUD would be taken to task by Congress and probably grilled by the American public if they knew we were giving out millions to jurisdictions that — by the sake of bad record keeping or maybe actual illegal activity —  are dumping good money down a hole.”

Honolulu Managing Director Doug Chin told Civil Beat on Tuesday that he’s not ready to comment on whether the violations at ORI appeared to have been deliberate misuse of funds or unintentional noncompliance. He said Honolulu Mayor Peter Carlisle, who is in Asia until June 20, is aware of HUD’s report and “taking it very seriously.”

Money Meant for Elderly Activities Used to Pay Salaries

The federal report that HUD sent to Carlisle presents a clearer picture of the nature of noncompliance issues.

Investigators wrote: “ORI impaired the monitoring by restricting HUD access to beneficiary information, refusing to provide full access to information and files of all beneficiaries … and misrepresenting use of Camp Pineapple 808.”

Camp Pineapple 808 is a facility on ORI’s property that was built using a Community Development Block Grant from HUD. It’s part of a larger complex known as the ORI Anuenue Hale Aloha Gardens, which also includes a wellness center. Investigators reported at least two potential violations involving outside groups that planned to use the Camp Pineapple facility:

  • July 7 – 10, 2011: United Methodist Women’s Hawaii School of Christian Women
  • May 28, 2011: American Camp Association’s Camp Staff Training Day

Federal investigators say ORI refused to show records documenting who uses the campsite, and lied about how many people used a 16,500-square-foot wellness center also on the site.

According to HUD’s report, ORI reported 19 to 27 clients used the wellness center each month between October 2010 and March 2011. Federal investigators characterized that number as a “significant under utilization of the facility.” But what they found when they visited the site was even worse.

“ORI refused to provide access to the participant files,” HUD investigators wrote. “During the on-site monitoring, HUD observed only five participants in the Adult Day Care program at the Wellness Center.”

The director of the city’s Department of Community Services, which manages the city’s use of CDBG monies, told Civil Beat that ORI was concerned about the privacy of the people who use its facilities. He says he met with ORI executives this week, and that they are “very open and willing” to cooperate with the city.

“We used CBDG money to build the facilities, the camp, and we need to make sure that whoever uses it, the use of it is CDBG-eligible,” Community Services Director Sam Moku said. “The way we would do that is we need documentation of who uses it. Their wellness center, the facility was underutilized. Not enough people accessing the services being provided. They ask that we figure out a way with them to provide more people access to their services.”

Federal investigators also found the city misused $66,861 in CDBG funds that ORI said would be used to serve elderly and disabled clients. ORI said the funds would be used for activities like exercise, therapy sessions, movies, cooking, music and excursions.

Instead, HUD found that ORI used the money to pay for the salaries of workers at the ORI Wellness Center.

City Neglected Oversight

HUD finds the city “failed to monitor ORI,” even after longstanding concerns about whether it would be able to meet eligibility requirements.

“There was fear that ORI might not be able to implement this project and meet those guidelines,” HUD’s Gibson said. “It seems like that’s come to fruition.”

Federal investigators reported that city officials formally acknowledged these concerns in 2003 and in 2008, but still failed to check whether ORI complied with federal requirements.

“Now, the city’s got to use some leverage to get ORI to do certain things,” Gibson said. “To be fair to the city’s administration, currently, they sort of inherited this. This has been going on for a while. To their credit, they are trying to work with HUD to get this resolved. Obviously, as you can well imagine, they don’t want to pay back that money.”

In order to avoid paying back $7.9 million to the federal government, Honolulu officials have to complete the following checklist:

  • Convert Camp Pineapple 808 into shelters for the elderly or adults with severe disabilities, and keep records demonstrating compliance
  • Increase the use of the wellness center
  • Stop funding ORI until it identifies how it will comply with federal guidelines (the city’s Chin tells Civil Beat this has already happened)
  • Repay $66,861 in CDBG funds that were inappropriately spent
  • Develop a system to better monitor ORI’s use of CDBG money
  • Conduct quarterly on-site monitoring of ORI facilities, beginning in September 2011
  • Submit reports to HUD about on-site monitoring

“ORI obviously has not done their due diligence in meeting the compliance standards,” Gibson said. “We’re not happy that they haven’t, and we’re disappointed that previous administrations of Honolulu let this slide. It looks right now like we’re moving toward resolution. All we can do is wait and see.”

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