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The city has notified the federal government that it will continue to suspend funding to ORI Anuenue Hale, Inc., the nonprofit at the center of a federal probe into possible grants violations.

The decision was outlined in a federally mandated report submitted jointly by the city and ORI as one of the necessary steps to avoid repaying the federal government $7.9 million in Community Development Block Grants.

In the report, obtained through an open records request by Civil Beat, Honolulu Mayor Peter Carlisle said the city is standing behind the Wahiawa-based elderly daycare center and will help the organization “reach its goals.”

In routine monitoring earlier this year, HUD found that ORI’s use of federal monies was “unacceptable.” The federal agency ordered “immediate corrective action” to bring the nonprofit into compliance with CDBG eligibility requirements.

The report was due to HUD this week, days ahead of a City Council Budget Committee hearing in which discussion of ORI’s funding issues is planned. The committee meets on the issue at 9 a.m. Wednesday.

Some of the key findings from HUD’s investigation included:

• ORI overstated how many clients it has
• ORI rented cabins meant only for elderly clients to corporate events and other outside groups
• ORI did not cooperate with a federal investigator seeking information about clients
• ORI used monies meant for senior activities to pay workers’ salaries
• Lack of oversight by the city

ORI has disputed HUD’s findings, and criticized the federal agency’s monitoring as “incomplete.” But a spokeswoman for the nonprofit, Yvonne de Luna, says it is working with the city to meet HUD’s requirements anyway.

“We feel there hasn’t been any misuse but we’re working with the appropriate government entities to get all of this straightened out,” de Luna told Civil Beat in an interview on Tuesday. “I think it’s important to preserve our reputation and clear our name.”

Instead of challenging HUD with documents or other evidence to back up ORI’s side of the story, though, ORI is taking steps to change the way it operates.

In its findings this year, HUD scolded ORI for offering its Camp Pineapple 808 cabins for weddings and other rentals when it was designed to serve the elderly. When Civil Beat visited the site in June, the camp appeared empty, but brochures in the Wellness Center said it could be rented for graduations, parties, banquets, corporate events, family reunions and more.

Now, the nonprofit has agreed to stop renting Camp Pineapple 808 to outside groups, and told HUD it has cancelled “any pending reservations or scheduled uses not exclusively serving the elderly and/or severely disabled.”

But in the same report, ORI hinted that it might resume rentals to private groups, citing the camp’s potential as a “strong financial resource.” The nonprofit specified it would not do so without taking steps to properly apply for “change-of-use” permission from HUD.

In their report to the city, federal investigators cited a violation with the use of $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.

Halting that funding was one of the first steps the city took when it received HUD’s findings. De Luna says ORI’s use of the money was appropriate.

“I do want to make it clear that the contract did say for hiring of staff,” de Luna said. “That was in our contract. It wasn’t that we detracted from what we were supposed to use the money for.”

But the city said ORI will not immediately try to obtain the grant money that is being held up, though it argues it deserves that money.

“(ORI) has chosen, at this time, to not submit a proposal detailing the proposed use of the public service activity grant,” the city’s report to HUD reads.

The city says it will work with the nonprofit through September to determine whether it can propose “eligible use for these funds.” Until then, the city reports, “the suspension of this grant remains in effect.”

Asked whether a decision to change operations rather than provide evidence of compliance could be seen as an admission of wrongdoing, de Luna said it should not be.

“I can see how people would interpret it that way but that’s not the case,” de Luna said. “At this time we’ve decided to not pursue that and just focus on completing and addressing current issues.”

The critical issue for ORI will be to increase the number of clients it serves. Again, ORI claims it is in compliance, citing 50 elderly patrons at the Wellness Center on a “regular basis.” That’s in contrast to a report from HUD, which counted five seniors on a surprise site-visit.

ORI says it will increase its outreach efforts in order to find new clients, including placing ads in the newspaper and hosting an annual “fun festival.” It also agreed to work with the city to improve documentation and reporting requirements, so compliance could be demonstrated to HUD.

Although De Luna told Civil Beat that it is free for seniors to use services at the Wellness Center, the city references high costs as a factor that decreases the number of people ORI serves. The nonprofit says its clients are strained by cuts to Medicare and Medicaid, the increased cost of gasoline and other economic factors.

But de Luna says ORI would only accept donations of about $1, if that, from seniors.

“If they want to, you know, give a dollar donation to the activity they’re welcome to,” de Luna said. “It’s an option. That’s just part of the activity to help defray the cost.”

ORI says it will work to increase its client base to 75 in the next one or two years, then to 100 in the years that follow. But it also raised concerns about competing centers. Here’s how that’s explained in the report to HUD:

“There are many competing factors to consider that affect utilization, including reduced resources available for the elderly and disabled, or other venues providing opportunities for seniors and disabled to interact with youth and other people, making this alternative a more attractive option for the target groups.”

De Luna said she plans to discuss these and many other challenges before the City Council Budget Committee on Wednesday.

“I think that to move forward, the community would like to see this facility grow and develop,” de Luna said. “We really would like to get everybody’s support on this. It will take more than just our agency. We try to find other ways to carry out the program. So we have to be kind of creative and we’re hoping to present that to the City Council.”