NEW ORLEANS (RNS) The federal government has ordered the Archdiocese of New Orleans to open millions of dollars in Hurricane Katrina-related rebuilding to public bid, but will not penalize the church for not having done so thus far.

Auditors from the Department of Homeland Security told the archdiocese last month the church had to stop using only its preferred contractors in rebuilding parochial schools, gyms and other sites financed with FEMA reimbursement dollars.

While the notice did not specify how much the church spent without seeking public bids, a church report issued in the summer of 2008 told local Catholics the archdiocese then had spent $35.5 million in FEMA money on rebuilding.

According to FEMA officials, the archdiocese has collected $329 million in reimbursements thus far.

Despite the finding, the government will not impose any penalty on the church for its past practices with FEMA dollars, FEMA spokesman Andrew Thomas said.

The federal auditors said church officials told them they had FEMA’s verbal OK to work exclusively with their preferred contractors, although the church couldn’t produce written evidence of that.

As a result of the audit, the archdiocese is designing an open bid process with FEMA’s cooperation, said church spokeswoman Sarah Comiskey. She said the archdiocese does not expect to see significant building delays as a result of switching to open bids.

In a report late last year, the archdiocese said it planned to spend about $108 million rebuilding schools, gyms and community centers across the region. That figure does not include additional millions slated for rebuilding homes under the auspices of Christopher Homes, the church’s charitable housing arm.