The coalition has been one of the Big Island's largest nonprofit organizations and a major provider of services for homeless people.

Big Island Mayor Harry Kim asked the Office for Social Ministry of the Diocese of Honolulu to step in and take control of the 52-bed emergency homeless shelter that the East Hawai'i Coalition has been operating in a county-owned building on Kapi'olani Street in Hilo.

Social Ministry officials took control of the facility yesterday.

At the same time, the county is buying a single-family home in Kaumana out of foreclosure that the coalition had operated as a transitional housing unit for homeless families. Kim said the county is also considering buying a second house that the coalition has operated as a transitional home.

The East Hawai'i Coalition for the Homeless suffered another major setback in 2005 when the agency lost the 54-room former Hilo Hotel in a foreclosure. The coalition bought the vacant Hilo Hotel in 2001 with plans to turn it into a transitional housing complex, but was never able to arrange permanent financing for the property.

Pamela Dodson, executive assistant to executive director of the Hawai'i Public Housing Authority, said her agency stopped funding the coalition Aug. 1 because the nonprofit failed to provide independent financial audits for the past several years.

Those reports are required by the state, and state officials had been warning the coalition since late 2005 that it would lose its state funding unless it provided the financial reports.

Dodson said the state had been providing the coalition with $285,000 to $300,000 a year under the state stipend program to assist the homeless, but that funding ended Aug. 1.

The state also had been providing the coalition with $50,100 a year in emergency shelter grants to help pay for shelter operations, but that money was cut off July 1, Dodson said.

Steve Bader, executive director of the coalition, said the coalition provided financial statements, but said the state is demanding a "time-consuming and costly" additional audit component that the coalition's auditors do not believe is necessary.

"They've received our audits ... but the issue is more of a compliance issue, whether or not those audits have all of the components in there to satisfy contract compliance," Bader said. He said there is no disagreement over the numbers, and "our auditors have said that these audits are complete."

Bader said he hopes to have the audit issue resolved so the nonprofit group will again qualify for future state funding.

In the meantime, Bader said, the coalition will continue to operate 14 scattered transitional housing units for the homeless and will run the Hale O Puna multi-service center in Pahoa that operates a food pantry and clothing bank.

As for the Hilo emergency shelter, "The bottom line is that we have been operating the shelter program at a loss for many years now, and we just didn't have the resources to continue to do that," Bader said.

Kim said he has held a series of meetings with coalition officials to try to arrange a smooth transition to new operators of the shelter.

Carol Ignacio, executive director of the Office for Social Ministry, said her agency is working on locating money to continue to operate the shelter, but isn't sure yet how much that will cost.

"We're looking at all kinds of options, but we have a commitment from both the state and the county to at least help us work through this next half of a year," she said. She said her agency is also asking for help from the community, and particularly needs help locating more affordable housing.