The city of Atascadero could be on the hook to return approximately $8 million in federal disaster funds after an audit found discrepancies in the way it used money received after the 2003 San Simeon earthquake.

On April 2, the Department of Homeland Security’s Office of Inspector General released a report that found the city didn’t follow guidelines and otherwise properly account for funds it received from the government for debris removal, emergency protective measures, and repairs to facilities following the 6.5-magnitude quake.

• PHOTO BY STEVE E. MILLER
• NUMBER FUDGE?: The Department of Homeland Security found that Atascadero officials made roughly $8 million in unaccounted claims to the Federal Emergency Management Agency following the 2003 San Simeon earthquake.

The city was initially awarded a total of $26.3 million for recovery efforts from the Federal Emergency Management Agency. Of the roughly $12.8 million reviewed in the report by the Department of Homeland Security’s Office of the Inspector General, the city didn’t expend or account for more than $8 million, according to federal regulations and FEMA guidelines, the report said.

The report made four major findings. Among them, investigators claim the city spent roughly $3 million in unsupported costs for repairs to the historic City Administration Building, as well as failing to follow regulations when it spent approximately $2.7 million to relocate city offices to a former bowling alley.

It further alleges that the city misused approximately $2.4 million for construction of a new community center by falsely describing the damaged Printery Building as a recreation facility, when in fact it was not used for that purpose.

City officials held a news conference on April 2 denying most of the report’s allegations. They did, however, admit that a typo on an invoice caused roughly $1,300 to go to repairs for the Printery Building that were meant to go to the City Administration Building. Officials say that error has been fixed.

The city released an initial response to the report, saying they have kept detailed documentation of the many earthquake-related repairs and expenses and have worked closely with FEMA each step of the way.

“The city is surprised by the audit findings, strongly disagrees with many of the findings, and questions the tone, characterizations and conclusions of the report,” the response reads.

The city began working with auditors in August 2010. It now has 90 days to issue a formal written response to the federal agency.