City actions put federal funds at risk

Honolulu residents who still harbor any warm and fuzzy feelings about their government after the last few weeks simply haven’t been paying attention.

Any number of events on the national level could have prompted distrust of government, but locally few incidents produce the effect as vividly as the fracas over $8 million in federal funds given to an Oahu nonprofit — Opportunities and Resources Inc. Anuenue Hale Inc. — being called into question. The problems must be rectified promptly, lest the city lose future access to federal support of its projects.

Additionally, Mayor Kirk Caldwell and City Council Chairman Ernie Martin, both having links to the nonprofit through campaign contributions, have to answer federal questions about the use of taxpayer money and institute tighter controls on the flow of federal grant money through the city to nonprofits.

In this case, instead of overseeing ORI as it should, the city has shepherded through loan forgiveness requests and failed to act on various points of noncompliance, according to the U.S. Department of Housing and Urban Development.

HUD issued the grant under a Community Development Block Grant (CDBG) agreement. Now, because of numerous irregularities in the nonprofit’s fulfillment of its grant, HUD is insisting that the city return the $8 million ORI had received, or "suggest potential resolutions" to the agency.

CDBG grants come with some strict terms. In the case of ORI, its Central Oahu projects — the Aloha Gardens Wellness Center and Camp Pineapple 808 — were to be used primarily to serve seniors and people with disabilities.

Among various infractions highlighted, a major focus of the HUD crackdown was to assert that ORI had not followed this directive and instead, was making the facilities available and marketing them as rentals to the general public.

In its searing report delivered to the city on Monday, the federal agency pointed out that city officials involved in 2010 decisions to forgive $1.2 million in outstanding loans also received campaign donations from at least one ORI principal.

HUD did not name the campaigners beyond pointing out that "city employees, running for elected office, were directly involved in approving, developing or recommending the ORI CDBG loan forgiveness while receiving campaign donations from ORI representatives."

Around the time of the loan forgiveness, Caldwell was managing director and then acting mayor, and Martin was deputy director of the Department of Community Services, the city agency overseeing ORI.

Caldwell, Martin and then-Mayor Mufi Hannemann have received campaign contributions from ORI founder Susanna Cheung in recent years; records also show Hannemann receiving a donation from ORI Chief Executive Officer Ann K. Higa.

In addition to an inquiry underway by the city Ethics Commission, Caldwell has ordered an internal review, to be aided by a private detective firm, Goodenow Associates. HUD had directed the city "to ensure proper authorities are reviewing the possible kickback situation," a reference to one of the questions raised in the report. HUD released a letter sent from Cheung to a contractor "to confirm that a monetary donation of $90,000" would be made to ORI when the contractor’s work was done.

A HUD spokesman said the agency has not confirmed that a kickback was made; in the report, the city was directed to investigate this, among other issues.

While the city probes are necessary, a July 18 deadline looms, which means investigations must be given top priority.

The whole revelation casts a pall over one of the ways government serves those in need. The CDBG program is there to provide aid to organizations that work within specific communities and thus, in theory, are positioned to help people most efficiently and effectively.

The grants supply city grantees with a lot of funds. Over the past five years, it’s ranged from $7.5 million to $10.5 million.

City officials are accountable for the slipshod efforts made at oversight to date and must do what’s needed to keep its share of federal aid for the benefit of the community at large.

As for ORI, the nonprofit has been on the receiving end of substantial federal grants over the years, and if it’s found to be falling down on the job it promised to do, the money can and should go to some entity that can deliver.