The embattled Wahiawa senior center at the center of a federal investigation is abandoning plans to seek continued Community Development Block Grants, according to a Jan. 31 letter obtained by Civil Beat.

And ORI Anuenue Hale is turning down almost $200,000 that had been allocated to it last year, a spokeswoman for the U.S. Department of Housing and Urban Development (HUD) said. The city will be able to use the money for other projects.

Honolulu officials are still working with the center to meet federal grant requirements so that the city can avoid repaying $7.9 million in HUD funds that ORI received over a 10-year period.

“ORI has confirmed with the City that they are not interested in submitting a new proposal for the CDBG public service grant,” wrote Honolulu Budget Director Michael Hansen in the Jan. 31 letter to HUD. “As such, the City will be formally terminating the contract and will be making these funds available to alternate public service projects.”

ORI’s program director said that the nonprofit will apply for other grants and seek private donations in order to stay operational.

“It doesn’t stop us from seeking other funding, just not necessarily CDBG (funds),” said ORI Program Director Yvonne de Luna in a Tuesday interview with Civil Beat. “We still need the money but we’re going a different route. We believe we are doing the best we can, and we’ve complied with whatever is required of us and we’re continuing to do so. Rather than to keep going back to the same, let’s see what other sources are out there.”

Last spring, federal investigators conducting routine monitoring at ORI reported a slew of noncompliance issues at the sprawling 40-acre complex. The result: A warning to the city that it would have to take “immediate corrective action” to bring ORI into compliance.

Some of HUD’s key findings from the investigation included too few clients using the ORI Wellness Center and violations of grants requirements that stipulate eligibility for renting ORI’s Camp Pineapple 808 cabins. HUD also flagged the possibility that ORI was charging fees that would preclude the low- and moderate-income clients that the center was built to serve.

ORI officials disputed the federal findings, but they also agreed to work with the city to bring the center back into compliance.

‘Don’t Cut Corners’

Honolulu Director of Community Services Sam Moku, whose department oversees CDBG funding, said the city is still “on track” to prevent the feds from recouping $7.9 million. But he also said that the investigation has taught him an important lesson.

“Do right the first time, that’s what I learned the most,” said Moku, who became director of the department in early 2011. “Don’t cut corners.”

In October, the city and ORI submitted a final plan to meet the federal government’s grants requirements. HUD accepted their plan, which included:

• A goal to signficantly increase the number of regular clients using the facility

• Required quarterly on-site monitoring by the city

• Submitting regular progress reports to HUD

The city also took steps to answer many of HUD’s unresolved questions about ORI. For example, Honolulu officials reviewed ORI’s financial records and reported that ORI is not charging fees that would prevent low-income clients from using the facility.

“We’ve learned the hard lessons and now it’s time we get the boat back on track,” Moku said. “With this administration, I think we’re heading to greener pastures, with better controls in place to ensure our accountability.”

Moku said that there is a “very good” chance that the city will keep the $7.9 million that’s at stake. HUD has given Honolulu a June 2012 deadline to get ORI to where it needs to be.

The city is reporting progress, but there have been some setbacks. For example, Budget Director Hansen said in his Jan. 31 letter that ORI has more regular clients — but not as many as the city estimated it would have by this time. The plan was to have at least 30 regular users by now, but the city reported the average daily client count is at 23. To continue to attract clients, ORI has distributed informational fliers and contacted churches and senior groups, Hansen said.

Culture Shift at City Hall

As ORI undergoes changes, Moku said that the culture in his department has shifted as a result of the investigation. A renewed focus on federal rules and regulations and stronger records keeping emerged as a result, he said.

“I’ve empowered (Community Services staffers) to make the right decisions without having to feel like we need to divert from what the rules and regulations are for the feds,” Moku said. “There’s been a lot more collaboration with the nonprofits now — as far as making sure we get what is needed because it’s required by HUD. Being able to document those requests, that’s been a big benefit for both (the city and the grant recipients).”

Both ORI and the city say that their working relationship has been positive. Asked about previous complaints from ORI that HUD was unfair in the handling of its investigation and opaque about its expectations, ORI’s de Luna said she would “rather not dwell on the past.”

But the future is not certain. Even if ORI decided to seek another CDBG grant someday, Moku said it’s unlikely that city will see the windfall that ORI was able to dip into over the past decade.

“In the past, we would be getting anywhere from $15 (million) to $20 million,” Moku said. “Now we’re literally under $10 million, and we’re not able to give out the large amount of monies we used to. The most we give out now is maybe $1 million but even that in the future is going to be less and less.”

De Luna said that ORI is not in immediate danger of closing as a result of the termination of its CDBG funding agreement, but concerns about money still appear to be top of mind.

“We’re doing the best that we can,” de Luna said. “We’ve always said — I think from the original proposal — that there needs to be an income-generating source. Now you hear news that there’s no money. What do you leave nonprofit organizations to do?”

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