Senior Nutter administration officials said yesterday that they had discovered serious accounting lapses in the management of the Neighborhood Transformation Initiative, and announced that they would suspend all land-acquisition activities until a forensic audit can be done.

In effect, Mayor Nutter is putting NTI - arguably former Mayor John F. Street's single largest initiative - on freeze indefinitely.

Nutter has long harbored doubts about the effectiveness of NTI, a program designed to demolish neglected buildings in impoverished neighborhoods, consolidate parcels, and clear the way for redevelopment. But administration officials yesterday limited their criticism of NTI to the program's accounting problems.

Since 2002, the city has committed itself to condemning thousands of distressed properties at an estimated cost of $73 million. The trouble is that the city has only about $41 million in unrestricted funds available for that purpose, administration officials said at a briefing for reporters yesterday.

To cover the $32 million gap, the city's Redevelopment Authority (RDA) tapped into another property-acquisition bond, this one valued at $44 million. Unlike the other bond, however, the $44 million fund came with strings attached: Most notably, land bought with the bond would later have to be sold at fair market value. The city and the RDA appear to have ignored that restriction.

Until now.

"We can't responsibly keep acquiring land if we don't have the funds to acquire the land, or the right source of funds," said Andrew Altman, deputy mayor for planning and economic development.

Administration officials said that they had no reason to believe the failings were the result of any criminal wrongdoing, and that they had no plans to refer the matter to law enforcement.

The city is not obligated to make good on all of its $71 million in land-acquisition commitments. Indeed, the city has yet to pay for most of those properties, and it is unclear what will happen to them now. No developments are planned for most of the condemned properties. The vast majority were destined for the RDA's land bank.

Altman laid blame for the mess at the feet of the RDA, which issues the NTI bonds and uses the funds to acquire properties.

Last month, labor leader John J. Dougherty resigned as RDA chairman, a post he had held since 2000. Although Nutter did not explicitly ask Dougherty to step down, it was clear the mayor wanted his own appointees on the board of the powerful agency.

Dougherty declined to comment through his spokesman, Frank Keel. Herb Wetzel, who served as RDA executive director until 2006, did not return a call seeking comment. Street and his first NTI director, Pat Smith, also did not return calls.

Contact staff writer Patrick Kerkstra at 215-854-2827 or pkerkstra@phillynews.com.