CUMBERLAND — Noel Johnson returned to the House of Compassion in October, after five years living on his own. HIV positive and 53 years old, he weighed 93 pounds. He had not been taking his medication. For a time, he was living on the streets.

“Everything was out of whack,” Johnson said. It has been a dramatic turnaround.

Now at a healthy 145 pounds, he follows his regimen of medication and checks in with a physician regularly. He has speaking engagements, where he talks about his 10 years living with HIV.

“I’m on top of my game,” he says, giving credit to the house where he enjoys free cable television, his own bedroom, and a “family” environment for $174 a month: “Here you are a human with dignity and respect.”

But Johnson and other residents may not be there for long.

The nonprofit boarding house, which serves low-income persons suffering from AIDS and HIV, had a large portion of its federal funds withdrawn by the U.S. Department of Housing and Urban Development and may be forced to close, according to its founder and executive director, Colleen Scanlan, and state officials.

The loss of revenue amounts to nearly $250,000, or almost 80 percent of what is needed to run the eight-bedroom house and three satellite apartment units. The house, which has been at the historic Luke Jillson House on Mendon Road since 1994, is appealing HUD’s decision with Providence-based Rhode Island Housing, which is in charge of distributing money that state organizations receive from HUD.

In the meantime, Scanlan says it will remain in operation. “It is not a question of whether the money is being spent the wrong way. It is a question of bookkeeping style. It is nothing serious,” she said. “We have been doing everything legally and ethically from day one.”

Over the past year, HUD officials have expressed concerns about the organization’s “programmatic and financial management systems,” according to Kristine Allard, of Im-aj Communications & Design, the public relations firm representing Rhode Island Housing.

It is not the first time that the house has faced criticism about management practices. In 2004, the state Department of Health noted that the house was offering services that only a licensed assisted-living facility should provide. The department denied a grant request that would have given the house additional funds.

According to Allard, an audit conducted by HUD in May 2007 confirmed that the House of Compassion was not meeting the records requirements HUD mandates for grant recipients. On March 13, the House of Compassion received a letter stating that its HUD financing was suspended until it found a suitable partner to continue operations.

Officially, the house stands to lose a three-year grant of $303,676 and two, one-year grants totaling $42,362. The house also receives $88,000 a year from the City of Providence in the form of a Community Development Block Grant and an $8,000 grant from the General Assembly.

Scanlan said the house came back to Rhode Island Housing with two potential sponsors: the Town of Cumberland or Tri-Hab, a Woonsocket-based substance abuse service run by Gateway Healthcare. Both offers were ultimately rejected.

Rhode Island Housing has declined to issue a copy of the audit or to explain how it was conducted or what timeframe it covered, saying that the audit contains private and confidential information and is not a public document.

Allard, its spokeswoman, said in a statement that the audit identified concerns about the House of Compassion’s “financial-management practices, record keeping, conflicts of interest, documentation of service provisions, and memorandums of agreements with service providers.” Allard declined to elaborate on the concerns.

Scanlan says that only two of the issues raised, “financial management practices” and “record keeping,” were addressed in the audit, of which she released the first two pages of yesterday.

Dated Feb. 25, the audit lists six deficiencies, among them, lack of a records system for funding; failure to identity persons who may have accessed and removed financial records; failure to return records to files or misfiling them; lack of specific policies for removing prior year records from the files; lack of a detailed chart of accounts; and incomplete documents.

It noted that the house used a single financial ledger to account for numerous sources of federal funds, which made it difficult to determine how funds were expended. “The problems are not new,” but are in the process of being addressed, Scanlan said.

Rhode Island Housing’s remaining concerns were made in a letter dated April 14. That included what Rhode Island Housing viewed as “a conflict of interest.”

In July 2007, Scanlan hired her son, John, now a 19-year-old freshman at Rhode Island College, as the house’s “social services designee.” In the full-time, entry-level position, he earned $8 an hour and was responsible for managing federal filings, including food stamps for residents and information for HUD’s Homeless Management Information Systems, according to Scanlan, who added that her son was qualified for the job.

She said that the position had been previously filled by another 19-year-old whom she declined to identify, and the post had been vacant for an unspecified period of time until John assumed its duties. He is one of five employees, including Scanlan, currently on the house’s payroll, which has not been paid since March 16.

Rhode Island Housing also charges that the house does not maintain records of what services are being provided for its residents, nor does it maintain agreements with other health-care providers to offer services that the house cannot provide.

Scanlan denies the charges. She produced at least one resident’s service file, which contained dates of doctor’s visits, copies of evaluations from staff and outside physicians, as well as the patient’s progress towardlong-term and short-term goals.

She also produced memorandums of agreement with Discovery House, AIDS Project of RI, CODAC and Gateway Healthcare, which were dated 2007.

Scanlan says the records were made available to auditors. Rhode Island Housing did not respond to a request for comment yesterday.

The audit “is an exaggeration to justify what they are doing,” Scanlan says. “Every year we have gotten a clean bill” from an independent auditor, she said. “What happened in 2007?”

pmarcelo@projo.com