Groucho Marx had a famous gag which went, "he's a very honest fellow, but you have to watch him."

That line seems appropriate for a report yesterday that the city housing department turned over nearly a quarter million dollars in federal funds to the Council for Equal Business Opportunity, a local minority business development program, before officials at the Department of Housing and Urban Development had a chance to approve new guidelines aimed at ensuring that the money would be well spent.

HUD and the city have been feuding over CEBO funding for years, with the feds claiming that CEBO's records are a mess and that the housing department has failed to exercise adequate oversight. Things got to the point where HUD flatly forbade the city from providing CEBO with any more federal money and demanded it refund about $2 million previously allocated. But last month, after members of Maryland's congressional delegation intervened, HUD rescinded the ban contingent on the city's promise to scrutinize CEBO more closely.

The city promptly resumed funding CEBO, which was on the point of insolvency, at the same time that it gave HUD written proposals for tightening its oversight of the agency. Now it appears the housing department jumped the gun by not waiting for formal approval of the plan from HUD.

Normally such a lapse might be dismissed as a minor bending of the rules, but because the case involves a history of oversight complaints, the housing department's precipitous action merits suspicion. So far there has been no evidence of unethical or criminal wrongdoing. But clearly this is a situation where all parties need watching.