It was more than 10 years ago that the Rev. Coleman Costello, a streetwise Catholic priest known for his work in drug-infested corners of Queens, had the vision to build Mary’s House. It would be the first shelter in the country for victims of elder abuse, a place where battered women over 65, aged homeless men, and other needy elderly people could come for help.

Now, the shelter, for which legislators have voted more than $2 million in city and state funds, has been constructed in Ridgewood, but it has yet to open its doors. According to an internal report conducted by the state’s welfare inspector general and obtained by The New York Sun, the nonprofit group that Mr. Costello first started to combat elder abuse, Walk the Walk, mismanaged thousands of dollars in public grants and ran up more than $1 million in cost overruns at the shelter – more than half the project’s initial budgeted cost of $1.8 million.

Mr. Costello, 63, who served as executive director of the group and had an annual salary of $88,000, criticized the inspector’s general findings yesterday as inaccurate and misleading. The report was expected to be released to the public this week.

“They’re just doing their job, and they’re doing their job on us,” the priest said of the state’s investigators. “If you follow someone around long enough you’re going to find something.”

According to the report, to secure public money, Walk the Walk misled city and state agencies about the number of elder-abuse victims it served, “recycling” clients and creating the impression its staff was conducting outreach when it was instead shuttling clients between programs.

Mr. Costello also abused the public grants, the report says, by charging more than $22,000 in personal expenses to the nonprofit group’s credit card, for such things as dinners at restaurants, shopping trips, and grocery bills near his home in West Hampton, on Long Island. The investigation into Walk the Walk began more than a year ago and stemmed from an anonymous tip, the state’s welfare inspector general, Paul Balukas, said in an interview. Mr. Balukas said that some of the alleged improprieties could constitute grounds for arrest, but that Mr. Costello’s motivations were not criminal and much of the allegedly improper activity was approved by the group’s board of directors.

Mr. Costello, defending his group and its mission to aid victims of elder abuse, said the investigators have ignored the “nuances” or “gray area” of Walk the Walk’s dependence on the city grants. Many of the government subsidies were not received on time, he said.

Of the credit-card charges, he said many of his group’s other employees also used the card to make purchases. On one expense, he said he made a $19 purchase at Coach for a replacement for his calendar, and investigators chided him for shopping at a luxury store.

“They paint me out to be this Machiavellian character,” Mr. Costello said. “I don’t wear diamond rings and drive around in a Mercedes. I used my own money, $50,000, $60,000, I cashed in my 401(k) to start this thing and pay the rent, and now my credibility is ruined and the politicians that helped us are running for the forest.”

Mr. Costello said he began his career helping drug dealers and prostitutes in the parks of Queens and became known as the “angel-dust priest.” Years ago, he started to get involved in issues of elder abuse and formed Walk the Walk.

Above all, he said the reason for the problems uncovered by the state’s investigators was that his staff tried to do too much, with too little.

After conducting an audit of Walk the Walk last year, the city’s Department of the Aging terminated the group’s contract for “finance issues,” a spokesman for the agency, Christopher Miller, said. Without funds from the city, Mr. Costello said, it’s unclear whether the nonprofit group can continue to operate.

“We spent our money based on their promises,” he said of the city grants. “We owe bills now. The money is not forthcoming. Oh, boy, did we get hung!”

As for Mary’s House? “It’s there,” he said. “It’s fully furnished. It’s all ready to go.”