In November 2001, auditors began a preliminary investigation of a number of "Economic Development Initiative" grants that had been awarded in the New York metropolitan area, including the $700,000 "Children's Center" grant. In connection with the investigation, auditors allegedly learned that the "Children's Center" had failed to file any of the regular progress reports required under rules and procedures of the grant. When auditors interviewed Balkany, he insisted the funds had been used to convert a Bais Yaakov building into the "Children's Center" but he refused to provide the auditors with access to the school's books and records, according to the Complaint.