Federal housing regulators will undertake a full audit of an embattled city development agency, Common Council members disclosed Wednesday.

The inspector general at the U. S. Department of Housing and Urban Development said the review of the Buffalo Economic Renaissance Corp. will begin by early September.

Council members, meanwhile, said they also received verbal assurances from HUD officials that the sweeping review will include other city operations, including the Buffalo Urban Renewal Agency, that spend anti-poverty funds.

A month ago, Council members asked federal officials for a complete audit of how the city manages and spends anti-poverty funds. A HUD report released in March documented dozens of deficiencies spanning two mayoral administrations.

The Buffalo Economic Renaissance Corp. has come under intense criticism for questionable lending practices and other actions. Mayor Byron W. Brown’s administration has countered that dozens of changes already have been made within the agency. Earlier this month, Brown demanded the resignation of Brian Reilly as the agency’s president, claiming he was “wearing too many

hats.” Reilly continues to serve as Buffalo’s economic development commissioner.

HUD Inspector General Kenneth M. Donohue forwarded a letter to Council President Pro Tempore Michael P. Kearns, informing city lawmakers of his agency’s decision.

“Based on our review of the HUD Monitoring Report and discussions with the HUD Buffalo community planning and development director, we have concluded that an audit of the corporation is warranted,” the letter said.

Council members praised the decision. Kearns, the South Council member who is challenging Brown in the September Democratic primary, has been one of the more vocal critics of the Buffalo Economic Renaissance Corp., claiming money has been squandered to fund many political jobs.

“[The audit] sends a message to the current administration and all other administrations that this shadow government is not a piggy bank for patronage,” Kearns said.

Peter K. Cutler, Brown’s communications director, was quick to point out that the HUD report that contributed to the inspector general’s decision to launch an audit focused on a five-year period that included three years of former Mayor Anthony M. Masiello’s tenure.

Brown’s administration, Cutler said, has no objection to the closer review of the development agency.

“That’s the prerogative of the HUD inspector general,” he said. “We’ve had an open and positive dialogue with HUD, from the secretary on down.”

Council Majority Leader Richard A. Fontana said the criticism of Buffalo’s handling of federal anti-poverty funds is “not an indictment of one mayor,” noting that the problems have been well documented for many years.

“The block grant [program] has been the same record played over and over,” he said.

During a conference call Wednesday morning, Council members said regional HUD officials told them the audit probably will take several months. HUD representatives could not be reached to comment.

City Comptroller Andrew A. SanFilippo also has been auditing the development agency, a probe sparked by subsidies for One Sunset, a now-defunct Delaware Avenue restaurant and nightclub.

SanFilippo also has vowed to push for giving his financial team “day-to-day” oversight of city development agencies.

“I think it’s time for these shadow agencies to come out of the dark,” the comptroller said earlier this month.