Federal intervention could have been avoided. That was the message from U.S. Housing and Urban Development officials who spoke with Civil Beat about the latest developments in HUD’s investigation of a Wahiawa senior center.

HUD officials say they will meet with Honolulu officials this week to discuss the city’s response to federal investigators’ finding of possible misuse of federal funds at ORI Anuenue Hale, Inc.

At stake is $7.9 million in grant money that the city will have to pay back if it doesn’t bring ORI into compliance, the federal government warned. HUD officials told the city that ORI had a slew of noncompliance issues at the rural 40-acre complex.

In addition to writing up ORI Anuenue Hale for underutilized facilities, problems with record keeping and other compliance issues, the federal government said in a May letter to the city that it had “failed to monitor” ORI despite email exchanges among city staffers expressing concerns about whether the center was following HUD rules.

ORI officials have complained the federal response is too severe, and say they feel singled out. A spokeswoman for HUD said ORI was selected for routine monitoring because it had received more Community Development Block Grant money than any other Hawaii program.

“It’s such a great amount of funding,” said Gene Gibson, a regional spokeswoman for HUD. “It’s incumbent on the federal government (to keep track of it). That was what prompted the monitoring but obviously they then discovered some things, where there may have been misuse of these funds.”

City Council Chairman Ernie Martin tried to challenge the characterization of ORI’s problems as a possible “misuse of funds” in a City Council hearing this week. But HUD’s Gibson told Civil Beat that such a characterization is “fair.”

For Martin, more may be at stake in the outcome of the ORI investigation. He served as acting director in the Community Services Department, which is responsible for oversight of CDBG grants, until he was elected to the City Council last November. Martin rose quickly to the council chairmanship, just seven months after winning one of the narrowest races in the 2010 election, and has hinted at higher political ambitions.

In an interview with Civil Beat in June, Martin said his former department “probably did not do the more deeper level of monitoring that HUD did, with regards to viewing participant files, checking programs and services,” but said he wasn’t certain.

In HUD’s opinion, the city should have found and addressed the compliance issues that HUD raised before the federal government found them.

“In this particular project, there are issues that concern us, and part of those concerns need to be, to some degree, placed at the feet of the city,” Gibson said. “It’s their responsibility to check on these people to whom they assign the CDBG funds. With this project, failure or problems or potential misuse of funds, they should be watching it.”

National HUD spokesman Brian Sullivan echoed Gibson. HUD agrees to give the city grant money on the condition that it monitors the programs that receive that money, he said.

“We don’t have a grantee relationship with the senior center,” Sullivan told Civil Beat. “Our grantee is the city. So when we have an issue with anything, we go to the city.”

In the hearing last week, though, City Council members asked the Community Services Department few questions about its conduct. Council member Stanley Chang was the only person who seriously questioned ORI staffers about HUD’s specific findings, and no one asked Community Services about the failure to monitor in the past.

That may be because the department’s former acting director, Martin, was doing much of the questioning. He appeared more concerned with whether HUD had been courteous with ORI, and seemed bothered that a copy of the federal agency’s letter to the city was made public before ORI saw it.

HUD officials say they will comment on the city’s proposal to improve its monitoring and help bring ORI into compliance after the Aug. 10 meeting.

“If the city of Honolulu has to repay this money, those funds come out of their own coffers,” HUD’s Sullivan said. “It is a sanction. In these times, they probably weren’t budgeting for this.”

DISCUSSION: *What are your thoughts about Honolulu’s oversight of ORI? Join the conversation.

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