PROVIDENCE, R.I. — An audit report released Monday by the U.S. Department of Housing and Urban Development's Office of Inspector General said the state of Rhode Island "did not properly administer" federal money given through the Neighborhood Stabilization Program, and "as a result, HUD had no assurance that more than $6.3 million ... was effectively and efficiently used."

The inspector general recommended that HUD require the state to "repay more than $1.4 million in ineligible costs" and "establish an agreement between the state and Rhode Island Housing to define responsibilities."

The Neighborhood Stabilization Program was authorized in 2008 to help communities hit hard by foreclosures. The audit report looked at $19.6 million in NSP money awarded to Rhode Island on March 12, 2009. Of this money, $16.3 million was administered by Rhode Island Housing and $3.3 million was administered by the City of Providence.

In addition to the repayment of more than $1.4 million, the audit report recommends that HUD require the state to "provide adequate documentation to support or repay more than $4.5 million in NSP costs" and "provide support for the necessity and reasonableness of $489,518 in unexpended NSP funds."

"Neither Rhode Island Housing nor the City had adequate record-keeping controls," the report said. (Although the state had an agreement with the Providence Redevelopment Authority to administer the NSP program, the city's Office of Community Development staff actually ran the program "with limited involvement and oversight" by the PRA.)

In one case, the report said, "one [unnamed] developer submitted documentation to the City estimating development hard costs as $640,081; however, the building permit in the file showed the estimated cost of material and labor as $267,500. Rhode Island Housing and City staff also did not ensure that the files included support for the final actual total development cost."...