Duluth was in dire need of help after it was slammed by heavy rains and flooding in 2012 – and that help came in the form of over $13 million federal dollars.
But the federal government says the city didn't dole out all of that money in a fair way, and it now wants nearly $1.8 million back.
Duluth received the federal funds by way of several state agencies, after the June downpour inflicted the area with sinkholes and left serious damage to roads, parks, and bridges.
According to a report from the Homeland Security's Office of the Inspector General, Duluth awarded contracts to a number of local businesses to help repair all that damage, but in doing so, failed to take "affirmative steps" to solicit "small and minority businesses and women's business enterprises" – a requirement when using federal relief funds.
A good chunk of that money, the report says, was awarded without assuring "full and open competition" between potential contractors, and without the solicitation of disadvantaged firms.
The total the Inspector General says should be given back to the Federal Emergency Management Agency? $1.78 million.
Officials suspect about twice that – $3.08 million – was used to hire contractors in violation of these guidelines, but found that several of these contractors were employed to perform "exigent work," i.e. flood damage repairs that needed urgent attention.
Duluth, for its part, said Wednesday that it "acted in good faith" in the way it used the money and does not agree with the report's findings, the Pioneer Press reports.