The federal government says misuse of funds by a local nonprofit could cost the city government $8 million in federal grants, but the Honolulu City Council went easy on the organization and the administration in its first chance to get answers about the controversy.

In a discussion held as part of the council’s Budget Committee Wednesday morning, members tossed softball after softball to both ORI Anuenue Hale and the Carlisle administration department heads overseeing the city’s response to the federal probe.

Although the committee chair is Ann Kobayashi, members followed the lead of Council Chair Ernie Martin, who before he ran for office was acting director of the Department of Community Services that helped ORI secure federal funding.

One of Martin’s less-than-probing questions was to current Community Services Director Sam Moku. He asked Moku whether he was confident ORI would be brought into compliance. (“Very hopeful,” Moku said.) Martin asked Budget and Fiscal Services Director Mike Hansen if the U.S. Department of Housing and Urban Development should have made more of an effort to talk to ORI a second time before filing its report. (Hansen said he would have done so.)

Martin disputed the HUD claim that ORI’s problems could amount to a misuse of funds, and argued that the nonprofit has complied with all requirements on the capital projects that expended the lion’s share of the grant funds.

That’s a contrast to what Honolulu Mayor Peter Carlisle communicated to HUD at the end of June.

Carlisle signed off on a 13-page plan outlining corrective action the city will take to comply with HUD rules.

“We take the findings seriously and recognize that improvements are necessary to strengthen City administrative procedures,” Carlisle wrote.

ORI’s corporate leaders were given an opportunity to defend themselves against HUD’s allegations Wednesday. Chief Operating Officer Ann Higa, Program Director and spokeswoman Yvonne De Luna and founder Susanna Cheung painted a portrait of an organization that’s been unfairly targeted by the government despite its valuable work in the community.

“When HUD came to visit one day in April for a few hours, the result was a report that there were only five people there,” De Luna said, a claim that she says is untrue. (A visit by a Civil Beat reporter found the same thing.)

Backing up her argument were a roomful of elderly and disabled citizens who showed up en masse to express support for the nonprofit and show that the Wahiawa facility serves far more than the five people. Those who testified talked about the activities they’ve enjoyed at ORI, including tai chi, yoga, dancing and on-site medical care.

Dr. John Magauran, ORI’s medical director, said the accusations have been hurtful and sought help from the council: “You’re our representatives against HUD.”

Council member Romy Cachola declined to pick that fight, saying that he who has the gold makes the rules.

“If you’re not going to satisfy the federal government, that big hammer is ready to fall on us, and them,” he said, urging ORI and the administration to work together to “satisfy the No. 1 boss.”

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