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Buffalo's finance commissioner expressed confidence Monday that the city will not have to repay "a single dime" to the federal government in an ongoing dispute over how anti-poverty funds are spent.

The Common Council kicked off a three-week budget review by grilling Janet Penksa about a critical audit.

A federal inspector general has recommended the city repay nearly $500,000 in block grants and justify or return up to $24 million in additional funding.

This is an "astronomical" liability for the city, said South Council Member Michael P. Kearns, chairman of the Council's Finance Committee.

The audit by the U.S. Department of Housing and Urban Development inspector general concluded that the city continues to do a poor job of managing some block grant funds.

But Penksa told the Council she continues to meet with local HUD officials and remains convinced that the criticisms in the audit are the result of a "disconnect" between auditors and the HUD regional office.

"We feel confident that we will be able to address each of these issues without having to pay back a single dime," Penksa told lawmakers.

Penksa said instead of reviewing the city's justifications, the auditors "walked away." The commissioner said the city is now taking its case to regional federal housing officials.

Nearly two years ago, Mayor Byron W. Brown asked Penksa to head an effort to fix problems highlighted in an earlier HUD report. Penksa said Monday that the areas of concern preceded her involvement.

Interim City Comptroller Darby R. Fishkin was asked about the possibility of her office overseeing financial operations of the Buffalo Urban Renewal Agency, the entity that administers anti-poverty funds.

Fishkin said a legal fight more than two decades ago determined that the city comptroller does not have the power to step in. But Fishkin has not ruled out conducting a separate audit of the development agency.

The HUD audit contends that the city ignores some rules and inadequately documents spending, sometimes using federal funds for expenses that should be paid out of the city's general operating budget. It also found Buffalo sometimes slow to spend millions of dollars in anti-poverty money despite its ranking as the nation's third-poorest large city.

Questions about the audit surfaced as the Council began dissecting Brown's $462 million spending plan. His proposal holds the line on homeowners' property tax rates and reduces commercial rates by 1.3 percent. The plan would channel $70.3 million to Buffalo Public Schools, the same amount the city has provided in each of the past five years.

Kearns opened hearings by accusing Brown of funding 140 vacant positions -- or "ghost jobs" as Kearns called them -- to help build up Buffalo's surplus. He said the millions of dollars in unspent personnel costs represent a "slush fund" financed by taxpayers.

Penksa bristled at the characterization, insisting that budgets routinely include vacant jobs because the city must have resources to fill empty positions when new civil service lists come out and when employees who are on leave return to work.

e-mail: bmeyer@buffnews.com