The city of Sacramento likely is barred from getting federal money – including tens of millions the city is expecting from the new stimulus package – because Mayor Kevin Johnson is on a list of individuals forbidden from receiving federal funds, according to a leading attorney the city commissioned to look into the issue.

Federal authorities placed Johnson and the nonprofit Hood Corps organization he founded on the federal list last year – before he was elected mayor – following a preliminary investigation into allegations that the urban Peace Corps-style program had misused federal funds. Federal officials said the allegations were so serious the funding suspension was warranted.

Shortly after Johnson's election last November, City Attorney Eileen Teichert hired Frederic M. Levy – regarded as an expert on government contracting and compliance – to determine whether Johnson's inclusion on that list posed an issue for the city when it sought federal funding. Teichert had said before the election she thought Johnson's inclusion on the list would not threaten the city's access to federal aid.

Levy's response is laid out in a confidential memo, obtained by The Bee, that was distributed this week to City Council members.

The question, he said, is whether federal agencies consider the mayor a "principal" in city financial decisions; if the answer is yes, he wrote, it would "prevent the City from obtaining … federal grants, subsidies, or cooperative agreements."

Levy concludes that Johnson, in his role as mayor, likely would be found to be a principal, meaning he is "in a position to influence the use of federal funds."

So far, federal agencies have continued to grant funding to the city. But Levy's memo suggests the $44.2 million in aid the city has received or been allocated since Johnson took office in December could be at risk.

"Obviously, I'm concerned about the federal funds that we have received to this point," City Manager Ray Kerridge told The Bee.

Teichert wrote in a separate memo that "it may be appropriate for the mayor to abstain from … any decisions involving City projects for which federal funding may or will be sought."

Johnson declined an interview request Friday. In an e-mailed statement, he said he is confident the issue can be resolved quickly.

"I believe, as the City Attorney did in September, that there will ultimately be zero impact on the city's eligibility to receive the federal funds that Congresswoman Matsui, Governor Schwarzenegger, our U.S. Senators, and I are working hard to deliver to our city," he wrote. "I am optimistic this will be resolved positively in short order."

Top city officials will meet Wednesday to discuss the issue.

Levy, a Washington, D.C., attorney, provided his opinion March 13 and a copy of his memo was forwarded to Johnson and members of the City Council this week.

Johnson and officials with Hood Corps improperly used some of the $807,000 in federal grant money the organization received between 2004 and 2007, according to allegations released in September following an investigation by the Office of the Inspector General for the Corporation for National and Community Service. The corporation oversees AmeriCorps, the program that helped fund Hood Corps.

In response, federal officials placed St. HOPE Academy, operator of Hood Corps; Johnson, who was St. HOPE's founder and former president; and Dana Gonzalez, Hood Corps' former executive director and now a mayoral volunteer, on an Excluded Parties List, meaning they were suspended from access to federal grants and contracts for up to one year or until the case is resolved.

The federal audit of Hood Corps' use of funds is ongoing. A spokesman for the Office of the Inspector General declined to say when the review would be finished.

"We can't comment on any ongoing case," spokesman William Hillburg said.

Last year, the U.S. attorney's office in Sacramento determined the findings turned over by the inspector general did not warrant criminal charges. The U.S. attorney requested additional information, and held out the possibility of filing a civil action, pending the results of the audit.

Call The Bee's Ryan Lillis, (916) 321-1085.