Low to moderate income apartments were supposed to be built by the city, EDC, and Cutliff Grove Resource Center with about $374,000.
The city of Albany gave the money to Cutliff Grove but now that the apartments will not be built, the city also reimbursed HUD.
Commissioners voted on Tuesday for an investigation into the fiasco.
"I think the best thing is for us to do some more investigation and some research and find out what exactly took place as it relates to the money," said City Commissioner Chris Pike.
Commissioner Pike is not sure how long the investigation might take.