Kauai is home to one freefood distribution groups too many, so the state must choose which will receive federal support.

There’s a duplication of services, according to contract administrator En Young of the Office of Community Services.

“We need to make a choice,” he said

The office, part of the state Department of Labor and Industrial Relations, will submit a proposal to the U.S. Department of Agriculture by the end of the month recommending federal support for one of the two: either Hawaii Foodbank-Kauai Branch or Kauai Independent Food Bank.

At stake with the recommendation are surplus food for the Emergency Food Assistance Program and funding that can be use toward administrative costs for fiscal year 2012-2013.

“Right now, it’s still up in the air between the two,” said Young. “I can tell you, it will definitely be one and not both.” The USDA is expected to approve the state’s recommendation by the end of October.

The state currently has a contract with Kauai Independent Food Bank and with Hawaii Foodbank.

Kauai Independent in Lihue provided the service exclusively from 1994 until last year, after running afoul of its then-partner, the Hawaii Foodbank. Hawaii Foodbank has since set up a competing operation.

During an informal visit in June, Young sought input from agencies on Kauai that distribute food they get from one or both food banks. Confusion is swirling among agencies since Hawaii Foodbank opened a fully operational warehouse in Puhi during the summer.

“Some agencies said they wanted to deal with one, not two (food banks),” Young said.

If Hawaii Foodbank doesn’t receive federal support for the next fiscal year, President Dick Grimm said, the organization will continue to serve Kauai by distributing food to agencies from Honolulu.

But the lack of federal support would have a detrimental effect on Kauai Independent, according to spokesman and board member Tom Lodico. The loss could potentially lead to layoffs and the inability to serve Kauai agencies.

Hawaii Foodbank opened it warehouse, five miles away from Kauai Independent, a year after the organization terminated a partnering distribution agreement with Kauai Independent.

Among the concerns leading to the split was the use of a $779,000 grant for the Kauai food bank’s program to buy and distribute fresh fruit and vegetables to needy seniors.

In a July 2007 letter to Kauai Independent, Sam Aiona, then-executive director of the Office of Community Services, demanded the return of the money, citing forbidden markup charges. An IRS nonprofit Form 990 filing in 2007 showed Kauai Independent returned the grant to the USDA.

Grimm said Kauai Independent created an intermediary called Kauai Fresh, which was composed of the same members as those operating Kauai Independent. He claims Kauai Fresh sold the produce at marked-up prices to Kauai Independent in an effort to generate money for administrative purposes.

“You can’t sell something to yourself,” said Grimm.

Judy Lenthall, executive director of Kauai Independent, deferred comment to Lodico, who said the organization was never told by USDA that it couldn’t use the grant for administrative purposes for Kauai Fresh until changes were made to the contract. The USDA, he said, initially accepted the proposal, but final rules drafted through a new administration indicated that was not allowed.

Of Grimm’s accusations, Lodico said, “The allegations are false and misleading.”

During a recent interview, Aiona said USDA wanted the Kauai food bank to use the funds simply to buy food, but the organization formed Kauai Fresh to generate more money for the senior program.

Kauai Independent said its intent was to use the Kauai Fresh profits to feed more seniors.

“USDA said no,” said Aiona. “They wanted the money to be used for food. They wanted Kauai food bank to stick to the rules. Kauai food bank’s use of the grant funds were not in line with the intended use of what USDA had wanted.”

Kauai Fresh shut down in December 2006.

The state distributes food from the USDA to food banks across the state, based on population: 70 percent for Oahu, 13 percent for Hawaii island, 12 percent for Maui and 5 percent for Kauai. About 3.8 million pounds of food was distributed to food banks throughout Hawaii in the last program year.