The long-anticipated state audit on the city of Youngstown is out finding that the city owes more than $3.1 million for improperly spending water, sewer and environmental sanitation fund grants in 2017.

The audit concluded that the city is in non-compliance of state law and its ordinances by improperly lending a total of $4,462,662 from those funds to various businesses engaged in development projects in the city.

The audit found that during 2017, the city granted and loaned various businesses a total of $4,462,662, including $2,212,820 from the water fund, $1,841,434 from the sewer fund, and $408,408 from the environmental sanitation fund. 

The money in question should have been expended from the general fund or the business development fund, according to the audit.

“Ratepayers expect that the fees they pay for services will be used for their intended and legal purpose. In this case, the City has violated that expectation,” said Auditor of State Keith Faber. “My office has tried to balance our concerns regarding this misuse of money with the city’s financial condition and were met with a lack of willingness to address these findings. At the end of the day, it is my job to be a watchdog for our taxpayers and ensure that Ohioans can trust their local governments.”

One of the loans the city made is scheduled to be repaid, with an outstanding balance of $2,042,042. If payments are on time, the city has agreed to forgive $750,000 of this loan.

Assuming the loan balance is paid on time, the finding for adjustment against the general fund and/or the business development fund totals $3,170,620 in favor of the water fund ($1,696,003), the sewer fund ($1,324,617), and the environmental sanitation fund ($150,000).

Faber issued a finding for adjustment against Youngstown’s general fund of business development fund of $3,170,620 in favor of the water fund for $1,696,003, in favor of the sewer fund for $1,324,617 and in favor of the environmental sanitation fund of $150,000.

The audit advises the city to establish policies and procedures to help ensure expenses are posted to the proper funds.

Under the heading “corrective action,” the audit says the city administration and council are working with the law department and outside legal counsel to determine how to address the findings for misclassified grant spending.  However, the audit lists no anticipated date to complete that corrective action.

City officials previously told the state they "could not accept" it’s proposed 15-year repayment plan, which would require yearly payments of $211,375 to cover the $3.1 million finding.

The auditor’s office says the city of Youngstown was alerted more than a year ago that the funds had been inappropriately allocated. "Since that time the office has, to no avail, attempted to reach a reasonable resolution with the city." according to a statement from the auditor.

The city's interim finance director says this is "uncharted territory."

Mayor Tito Brown told 21 News he had no comment until he can review the audit and potentially discuss the matter with the state.

A  copy of the audit may be seen below