Federal auditors are reviewing the city's Community Development Block Grant records to determine if the money was spent in accordance with federal regulations.
The city's Department of Housing and Community Development receives $22 million in block grant money annually from the U.S. Department of Housing and Urban Development. The money is used for a variety of projects such as housing renovation and anti-poverty programs.
Bill Toohey, spokesman for the Department of Housing and Community Development, said the four auditors were looking at the records of "sub-recipients" or private organizations which receive block grant money through the city.
In the last few years, HUD has criticized Baltimore's housing department for being unable to keep track of grant money that goes to private groups.
One such organization, the Council for Equal Business Opportunity, which helps minority businesses, was cited by HUD for misusing $2 million.
HUD determined that CEBO violated guidelines calling for the money to be used to create permanent jobs for low- to moderate-income people. HUD also cited CEBO for dipping into its loan fund to get money to run its day-to-day operations.
Toohey also said the city and HUD's central office in Washington have formed a task force to try to solve the outstanding problems HUD has with the city's administration of the block grant money.
Last fall, HUD told city housing officials that the block grant program was "in substantial non-compliance" with federal regulations and that the city had a "lack of qualified staff" running it.
On June 3, said Toohey, Mayor Kurt L. Schmoke, Housing Commissioner Robert W. Hearn and other city officials met with HUD Deputy Secretary Alfred DelliBovi to try to clear up the city's problems.
For several months HUD officials have said the city's block grant is in jeopardy and federal officials threatened to penalize the city for its poor handling of the annual block grant, which will arrive July 1.
HUD deputy assistant secretary Russell Paul said last week that the city has a new "attitude," particularly since Schmoke became involved in trying to solve the city's problems with the grant money.
"The mayor's giving his personal word that the city will resolve these problems," said Paul.
He said HUD will approve Baltimore's block grant as of July 1, with the condition that various record keeping systems are put in place by October 1 to ensure the money is spent according to federal rules.
In particular, said Paul, Baltimore must develop a time keeping system for the housing department and the Urban Services Agency to show the amount of time employees spend on block grant work.
In addition, the city must develop a better system for monitoring the activities of outside organizations, including CEBO, to make sure the money is being used to help low-to moderate income people.
CEBO, said Paul, "is the toughest nut to crack," adding that the city can't issue any more money to CEBO until the city proves to HUD that it is adequately keeping tabs on how the business group is spending federal money.