Audit faults accounting on Street anti-blight effort

An audit has found significant accounting and reporting problems with former Mayor John F. Street's ambitious anti-blight effort, the Neighborhood Transformation Initiative.

The 15-month audit by the City Controller's Office determined that millions in bond funds were mismanaged because of a lack of accountability within NTI. The audit report, which is to be presented to Mayor Nutter and City Council tomorrow, was obtained tonight by The Inquirer.

A response from the Nutter administration contained in the audit report said the city intended "to fully implement the recommendations in this report to ensure any future use of these funds meets requirements of state and federal laws."

The response, dated last Friday, said that Nutter's chief of staff would be the point person for all future NTI activity.

Street's legacy program sought to rid the city of blight by demolishing 14,000 derelict buildings and constructing 16,000 new homes with $296 million in bond proceeds. The initiative, which was plagued by political fights and community opposition, fell far short of those goals.

The city controller's audit was prompted by a request by former Councilwoman Carol Ann Campbell, who wanted to find out what NTI had done in her Fourth Council District. The audit was expanded after Nutter took office.

The audit focused on the initiative's financial aspects, not on whether specific projects or the program overall was worth it.

A second, wider-ranging inquiry has been initiated by the Redevelopment Authority, which oversaw the program under Street. The RDA is now controlled by Nutter.

Last year, Nutter administration officials effectively suspended NTI after discovering serious accounting lapses in its management.

The city controller's report said that the Nutter administration, upon taking office, discovered that it "lacked information about the funding sources used to acquire the properties, where the properties were located, and the extent of dollars required to fund committed projects."

The audit found that NTI, as of June 30, 2008, had failed to make nearly $13 million in payments on nearly 1,500 condemned properties awaiting settlement in court.

The audit warned that the juggling of different bond sources, because of tax restrictions, could cost the city millions of dollars in penalties to the IRS.

The report recommended that the city improve oversight and accountability over land-assembly activity, develop accurate and timely accounting reports, and investigate discrepancies in NTI transactions.

The City Controller's Office retained an accounting firm, WithumSmith+Brown, to assist with the audit, which covered activity from July 1, 2002, through June of last year.