The city of Dallas should repay more than $1 million in federal money after it botched a program to replace dilapidated houses with new ones for low-income homeowners, federal auditors say in a new report.

The report echoes many of the findings first reported in a Dallas Morning News investigation in March.

The News found that the city gave more than $800,000 to an unqualified contractor who was a longtime associate of a local housing official, resulting in shoddy houses for the families the program was supposed to help.

The city put the housing official, Carl Wagner, on paid leave after The News' investigation.

The federal report, released this week, looked at 13 dilapidated houses that were demolished and rebuilt to help older and disabled homeowners. Federal auditors faulted Dallas for general mismanagement but were particularly critical of how the city awarded and enforced contracts with the builder featured in the The News' investigation: Dry Quick Restoration.

The city declined to answer detailed questions Thursday. The owner of Dry Quick declined to comment.

In a statement, the city said it was working with federal officials to fix problems: “We recognize the issues with our prior administration of the program and have already begun to address many of these findings and have developed more rigorous internal controls to ensure a higher level of accountability.”

Dallas hired Dry Quick without making sure the company had enough experience and money in the bank to do the job, the federal report says.

Dry Quick’s houses were plagued by defective workmanship and long construction delays. The families — who were living on incomes of $25,000 or less, according to the report — had to find places to live at their own expense for many months longer than expected.

“The delays caused a hardship for the homeowners that the program was designed to help,” the report says.

The report does not address the personal connection between Dry Quick’s owner, Kenneth Williams, and Wagner, the city official who helped him get the contracts in 2015.

Wagner could not be reached for comment.

The report, issued by the watchdog agency for the U.S. Department of Housing and Urban Development, said the city should repay $1.3 million. The audit also questioned $2.9 million that the city put into the program. Any repayments of federal funds will have to come out of the city’s own coffers.

The city and its housing department got new bosses last year and are revamping the homebuilding program.

City Manager T.C. Broadnax, who has been tasked with making sweeping changes at City Hall, contested the repayment. “While mistakes were made, construction was delayed, and documentation was deficient, the $1,322,617 expended on the homes were invested in the labor and materials used to construct the homes where the homeowners reside today,” he said in a letter to federal officials included in the report.

The audit raises other concerns — from the structural soundness of the homes to whether the contracts to build them were valid in the first place, because the proper city officials didn’t sign them.

Broadnax said the city would hire an engineer to examine the houses and would hire a contractor to make needed repairs. And while the city believes the contracts are valid, he wrote to auditors, “it would have been ideal for the City to have signed” them.

Deborah Isbell, who lives in one of the homes rebuilt by Dry Quick, said she hadn’t heard anything from the city in months about repairs her house needs. The house is missing a shower, and water from the air conditioner pools on the back patio because it slopes toward the house.

With the weather getting hot, she’s worried about what will happen when she runs the air conditioner again and it leaks water.

“I’m not going to let it run into my house if I can help it,” she said.

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