It’s a Wednesday morning at the Aloha Gardens Wellness Center in Wahiawa, where about 150 developmentally disabled clients, senior citizens, staffers and volunteers are singing karaoke and dancing “Gangnam style.”

The center is operated by the nonprofit Opportunities and Resources Inc. Anuenue Hale, the subject of a scathing report that said it failed to comply with requirements of the Community Development Block Grant program, with federal authorities this month demanding the return of a $7.9 million grant.

Barbara Gale Smith, 61, is one of about 50 Wellness Center clients who live at a facility next door owned by ORI Anuenue Hale’s sister company, ORI, also a nonprofit organization.

“I love it here,” said Smith, who also works at ORI Anuenue Hale’s main offices at the Wellness Center. On weekends, ORI arranges excursions to shopping malls and to the movies for her and her friends. Smith has even saved up money to go on trips to see the Eiffel Tower and other sights.

Like others in the ORI ohana, she said she doesn’t know what she would do without the network of agencies that ORI founder Susanna Cheung has put together for people like her.

“I don’t have anywhere else to go,” Smith said. “This is the best place that ever happened.”

But the closing of ORI Anuenue Hale’s Aloha Gardens project — made up primarily of the Wellness Center and Camp Pineapple 808 — is a possibility after a U.S. Department of Housing and Urban Developmentreport and letter were sent to officials in early Juneon the nonprofit and its relationship with the city.

HUD accused ORI Anuenue Hale of failing to comply with a number of its requirements and slammed the city, which administers Community Development Block Grants, for failing to properly enforce correction of the violations. The HUD report even suggested that political contributions were a reason for lax monitoring.

One of HUD’s proposed corrective actions is for the city to “cancel the Aloha Gardens activities.”

HUD said in a written response to questions in wake of the report that one of the potential actions would be “turning the Aloha Gardens project over to a nonprofit organization (other than ORI) that has a proven record of CDBG compliance.”

The cabins of Camp Pineapple 808 are nestled amid carefully manicured trees and bushes and a miniature golf course. The camp is similar to the YMCA’s Camp Erdman and others in high demand on Oahu during summer months. But most days it has no overnight campers.

According to HUD, Camp Pineapple 808 is to be used only by people with developmental disabilities, senior citizens and others who fall under eligible categories based on CDBG guidelines. ORI Anuenue Hale falls far short of meeting its 25-person-per-night occupancy standard, HUD said. The nonprofit claimed to have 30 users a month, but HUD said many did not qualify because they were daytime-only users.

Yvonne de Luna, an executive assistant for ORI Anuenue Hale, said the city asked that a goal be set of 50 overnight stays a month. She said the nonprofit would like to place more people in the cabins but rules won’t even allow family members of the developmentally disabled or seniors to accompany them on overnighters.

“We made it so if they wanted to, they could stay with their families … maybe for reunions … that was our original intent,” De Luna said. “But we’re locked into this limited clientele. And if you’re telling me we have underutilization, it’s because of that.”

HUD has criticized ORI Anuenue Hale for advertising to the general public in brochures billing the camp site as available for such events as weddings, graduation parties, reunions and fundraisers.

De Luna said ORI Anuenue Hale didn’t even know about the strict requirement until it was informed of them in a preliminary HUD report in 2011 that cited ORI’s noncompliance with block grant rules. That was when HUD first threatened to take back the $7.9 million grant.

A Honolulu Star-Bulletin story from December 2002 on the groundbreaking of Aloha Gardens described a plan by ORI Anuenue Hale to generate revenue by making available to the public the cabins and miniature golf, as well as a farmers market featuring produce grown on-site and arts and crafts.

De Luna said Cheung made it clear to HUD officials from the beginning that her original concept was to generate revenue from public rentals to support programs at ORI Anuenue Hale.

But after the 2011 HUD report, the nonprofit stopped advertising to the general public, de Luna said.

In an effort to comply, ORI Anuenue Hale has contacted other agencies who serve people with disabilities, and even high schools with a large percentage of students from low-income families, who are also eligible for the services, she said.

In addition, clients from the Wellness Center have been using campground facilities for exercise five days a week, de Luna said. Seniors and clients with disabilities also camp there from time to time.

But HUD officials said that does not meet with the camping provision and said that ORI Anuenue Hale failed to meet a 25-camper-per-night requirement.

The latest HUD report criticized the nonprofit for having a website marketing the camp even after being told to stop.

De Luna said the agency’s volunteer Web designers were experimenting with a mock site never meant to be public. It was taken down immediately after the nonprofit’s officials were notified, she said.

“We didn’t even know it was there.”

Last week, the Star-Advertiser found brochures displayed at the cashier’s desk at ORI-affiliated Helemano Plantation’s Country Inn Restaurant, as well as at the front desk of the Wellness Center, stating that Camp Pineapple 808 is available to the public.

ORI Anuenue Hale officials said the brochures were from years ago and should have been removed. De Luna said she and other employees have not had time to update the brochures.

The recent HUD report details a lengthy series of compliance violations, and the city’s failure to stop them.

Despite ORI Anuenue Hale officials’ claims that they were not aware of the requirements until 2011, the report said the city and the nonprofit had been discussing the definition of eligible users since 2003. “The city wrote ORI reminding it of its obligation to serve exclusively the elderly and disabled persons, and ORI regularly acknowledged these requirements,” the report said.

Although the report cites numerous other issues, the under-use of the Wellness Center and inappropriate use of Camp Pineapple 808 form the main thrust of HUD’s argument for the city to return the $7.9 million grant for the ORI Anuenue Hale property purchase.

The HUD report also noted that a 2004 memo it obtained from city records showed ORI Anuenue Hale agreed to pay a company for $5.3 million in site work for the Aloha Gardens project — and thanked the contractor for agreeing to pay $90,000 in a “monetary donation.”

HUD officials said the city should have looked into whether that was a kickback, and released a copy of the memo identifying Pearl City-based KORL Contracting.

KORL President Karen Lee told the Star-Advertiser that KORL never made a $90,000 donation. “They never asked me for that money,” Lee said.

Lee, however, said she does remember that when the project was finished, ORI Anuenue Hale asked her to forgive $20,000 still owed her company, an amount that had been outstanding for six months. Lee said ORI Anuenue Hale originally asked for a $20,000 donation but she did not have that much cash available. After much consternation, Lee said, she agreed to forgive the outstanding $20,000 balance.

HUD suggested that $1.2 million in CDBG loans issued by the city to ORI Anuenue in the 1990s was forgiven in 2010 by city officials running for political office who received contributions from ORI founder Cheung.

City records do not show any other nonprofit with CDBG loans getting such a break although one other has asked, city spokesman Jesse Broder Van Dyke said.

HUD documents showed then-housing official Ernie Martin signed off on one document related to the loan cancellations. Martin, now City Council chairman, told the Star-Advertiser he was simply “transmitting” documents already approved by others.

Martin received $4,200 in campaign contributions from Cheung, and in about the same period contributions from Cheung were also given to former Mayor Mufi Hannemann ($6,000) and then-acting Mayor Kirk Caldwell.

Cheung, however, has made a number of political contributions over the years to an array of candidates, such as former Republican Lt. Gov. James “Duke” Aiona and current Council members Carol Fukunaga and Ann Kobayashi.

In an interview with the Star-Advertiser, Cheung defended her campaign contributions.

“If you ran, I’d give you money,” she said.

Cheung, 76, estimated she has spent 40 years of her life and $1 million of her family’s money on helping people with developmental disabilities.

A diminutive woman with a confident demeanor and intense eyes, Cheung said she built the nonprofits from scratch to help young people with autism and other developmental disabilities.

Cheung, who immigrated from Hong Kong, said her Chinese upbringing teaches her “you don’t want a handout, you have to work hard for your money.”

Between ORI Anuenue Hale and Cheung’s other nonprofit, Opportunities and Resources Inc., 300 people are employed. A good number work at blue-collar jobs at military facilities through contracts won by ORI Anuenue Hale, Cheung said.

ORI and ORI Anuenue declined to give dollar figures, citing business confidentiality. According to tax filings in tax year 2011, ORI Anuenue Hale reported more than $9 million in revenues and expenses while ORI reported about $4.4 million in revenues and expenses.

Cheung said she believes she is being singled out because she is an immigrant. She may have two master’s degrees, she said, but “when you speak with an accent, people treat you like dirt.”

Cheung evokes loyalty from those in the ORI-Helemano ohana.

Toni Lee drives to Wahiawa from Aiea three days a week to volunteer as a cooking and dance teacher.

Lee said she volunteers with different nonprofits, but her favorite is ORI Anuenue Hale because of Cheung’s compassion toward seniors and those with disabilities.

“She’s a small lady but she has a big heart,” Lee said.

Attorney Michael Green also stands by Cheung and has been retained by her to assist in her nonprofit’s troubles.

“The service they’re providing is unbelievable, and HUD is talking about numbers,” Green said. “She’s putting in her own money and I’m looking at people who would have nowhere to go and — would be sitting at home watching TV — and giving them a life.”