A funding group set up by now-defunct community organization ACORN had misappropriated money from a grant it received from the federal government, according to an audit report released by the Department of Justice.

The report examines an Office of Justice Programs grant to the New York Agency for Community Affairs, a 501(c) 3 nonprofit that was set up by ACORN for nearly $140,000 back in 2005.

The funds were originally granted to NYACA on behalf of ACORN, which requested the funds for a program to recruit and train youth leaders, but the scope of the project changed to advocate an increase in local funding for after-school programs with a sum of $100 million over three years. The change of the project's intent allegedly violated the conditions of the grant, because NYACA and ACORN did not receive approval from the Office of Justice Programs.

Click here to see a copy of the report.

“This report confirms that ACORN and its rebranded affiliates have used fiscal sponsorship in an illegal and abusive manner to launder taxpayer funds into its own coffers,” said Daniel Epstein, executive director of Cause of Action, a Washington, D.C.-based independent, nonprofit government watchdog that has monitored the actions of ACORN over the years.

It was also discovered during the Justice Department's investigation that NYACA had internal control weaknesses, unsupported grant expenditures and a weakness in budget management. Also, according to the audit, the NYACA had no actual employees and responsibilities for the nonprofit were handled by workers from ACORN.

“That’s consistent with how ACORN sets up its system. ACORN is like an octopus. They set their tentacles out with these different 501 (c) 3s to receive funding from the government. These companies serve no other function than to fund ACORN with grant money,” Epstein said.

The Office of the Inspector General, which filed the audit, made 11 recommendations within its report, including to remedy the unsupported costs charged to the grant and to implement policies to ensure that a misuse of grant funds is avoided.

The report is just the latest in long line of scandals that has plagued the nonprofit group since 2008, eventually ending in it filing for bankruptcy in 2010 and disbanding.

The New York chapter of the national organization has since rebranded itself as New York Communities for Change and has had more controversies of late with allegations that they paid workers and homeless people to participate in the Occupy Wall Street protests, as first reported on FoxNews.com last month.

The findings led House Oversight Committee Chairman Darrell Issa to call for an investigation into the group.