Maui County officials have terminated the remainder of a grant with the embattled Wailuku Main Street Association, following repeated warning letters seeking compliance with an ongoing probe of the nonprofit's operations.
The county informed Wailuku Main Street's board Chairman Tom Cannon in an Oct. 26 letter that the organization's outstanding $243,000 grant had been terminated, effective immediately.
The letter, obtained by The Maui News through an open records request, also said the county will be taking action to recover anything the organization has bought with county funds.
The organization has received more than $2.2 million in grants from the county since 2002 through the Department of Planning.
In the county's 2013 fiscal budget, which began July 1, WMSA was not funded; its allocation was set aside for small town-planning services, which is what the organization is supposed to be providing.
Wailuku Main Street had received one-quarter of the $243,000 grant in December, but was informed in January that because of vague and inadequate financial accounting and a failure to provide requested information, the county did not have "an adequate understanding of how these county grant funds are being spent (and) therefore . . . will not approve your second quarter or future invoices for payment."
Planning Director Will Spence said that for subsequent quarterly payments, the grant terms required WMSA to provide program and financial information before additional funds would be released.
"WMSA's quarterly and final reports provided very little detail, and we could not determine what activities were being conducted for the program, or where money was being spent," Spence said in an email. "My office repeatedly requested basic information over the course of the year, and WMSA repeatedly refused. Under the terms, we had the right to withhold payment and we did exactly that."
The department and its attorneys had sent five letters between November 2011 and October requesting clarifications and additional documentation of the organization's spending.
In one of those letters, the county said that a WMSA report showed the nonprofit provided design and project reviews for "over 189 projects and provided 346 consultations/action requests throughout the life of the grant," but that "the only descriptions of these services is the town for which they were provided," with no other details.
The county noted that these services were critical performance measures for the grant money and that the county must receive sufficient documentation regarding work performed before releasing payment.
Another unfilled request was for an inventory of all property acquired with county funds. The organization's prior year report listed more than $11,000 spent on office equipment and repair and maintenance.
An Oct. 12 letter from Spence to WMSA's Cannon said it would serve as a final notice, warning the organization to supply all information requested within 30 days or risk the grant being terminated.
In response, Cannon sent a letter dated Oct. 18 explaining that the organization would not comply, and threatened to sue the county.
"We feel at this time that it is not appropriate to correspond with your department on this subject as Wailuku Main Street Association is currently in litigation," Cannon wrote. "In good faith, we once again state that to require significantly more details from a grant-in-aid with necessary safeguards in place is something entirely new and a definite change in the agreed upon rule."
Cannon said the nonprofit would seek legal action against the county.
"We can only conclude that the County of Maui Planning Department had no intention of complying with the financial obligations set out in our contract," he wrote. "WMSA will be seeking legal counsel and filing suit against the County of Maui."
Cannon did not immediately respond to requests for comment Wednesday.
The group is also the subject of an ongoing investigation by the state Department of the Attorney General for allegations of violating Hawaii's nonprofit laws.
In August, the state attorney general's Tax & Charities Division issued a report detailing its several-month-long inquiry of the association.
The report by Deputy Attorney General Hugh Jones cited nepotism, lobbying in violation of its grant contract, conflicts of interest, inaccuracies with its IRS Form 990, little evidence of program services and a "terribly confused" structure of governance, among other issues.
It also called for the removal of then-Executive Director Jocelyn Perreira and recruiting a qualified successor through an open competitive procurement process, reviewing and revamping some of its bylaws, not engaging in proxy voting and developing board policies.
With its county funds withheld, the organization said it was forced to downsize and had laid off its entire staff. WMSA has also vacated its Wailuku offices on Main Street.
Jones subpoenaed documents as part of the state's investigation, but the organization also has refused to comply with all of those requests.
Jones has since filed a petition against WMSA and Cannon in 2nd Circuit Court, seeking compliance with a subpoena and asking parties to appear at a Dec. 5 court hearing to determine whether Cannon and the organization should be compelled to obey the subpoena.
* Nanea Kalani can be reached at nkalani@mauinews.com.
