Investigators made 14 findings and listed three concerns. They also identified causes, effects and corrective actions.

The Bastian Court project in downtown gives a good sense of what HUD investigators found.

Bastian Court was to be a five-story apartment complex with about 60 units for low- and moderate-income tenants on the northwest corner of Stanislaus and L streets. It had been in the works since late 2007, when Alan Autry was mayor. A San Francisco-based nonprofit and Cornerstone Church's foundation teamed up as developers.

The developers wanted help to jump-start the $14.7 million project. The City Council in October 2008, a few months before Swearengin took office, agreed to invest $2.1 million of the city's HOME funds -- federal money with federal strings but handled locally.

All the developers had to do was get their own money.

But the housing market at the time was cooling fast, in Fresno as well as nationally. The full effect of the Great Recession was just over the horizon, but a chill was in the air. Bastian Court's developers failed year after year to line up the financing.

City Hall wasted no time spending HOME funds. City officials said more than $400,000 was paid to Cornerstone for the half-acre at Stanislaus and L. Another $176,000 went to raze a building on the property. Nearly $400,000 was spent on lawyers, engineers and architects. All told, the city spent slightly more than $1 million of the $2.1 million earmarked for Bastian Court.

There were two big problems with City Hall's gung-ho attitude.

HUD wanted construction on Bastian Court to begin within a year once City Hall committed the HOME funds. That didn't happen.

And HUD couldn't figure out why City Hall actually spent $1 million of HOME funds on Bastian Court when developers consistently failed to line up their own money.

The city "erred in reimbursing developers for predevelopment costs prior to the (project) obtaining permanent financing," HUD wrote.

As city officials acknowledge, City Hall faced the "chicken or egg" dilemma. The developers perhaps had a better chance of getting their financing if they could say to lenders: Look -- Fresno has a million dollars in the game. Or, City Hall could wait until the bankers jumped first, safeguarding taxpayer money but maybe dooming a worthy project with undue caution.

City housing officials, despite HUD rules, decided taxpayers should bear the risk for putting life into the project.

Assistant City Manager Smith doesn't explain what went wrong at City Hall. She said only: "That's why we're revamping with HUD all of our procedures going forward. HUD is actually developing those procedures for us. That's something very positive that has come out of this."

Bottom line, according to the HUD report: "Repayment is now required."

And not just for Bastian Court. The city did the same thing on a more modest scale for a southeast Fresno project called the Transit Village. The tab for this failed project was $162,000.

The city must repay all of the nearly $1.2 million spent on the Bastian Court and Transit Village projects. The money will be deducted from future HOME fund grants.

That's not all. The city had committed, but not spent, another $4.5 million of HOME funds for these two failed projects. Since the money wasn't spent in time, it's now lost to Fresno unless city officials can convince HUD to give them a second chance.

As HUD wrote, the city's mismanagement "has reduced the amount of affordable housing resources that may have been available to City residents."