We audited the North Carolina Department of Commerce’s Neighborhood Stabilization Program (NSP) grants as part of our annual audit plan because the Department received more than $57 million in NSP1 and NSP3 funding. Our audit objective was to determine whether the Department administered its NSP1 and NSP3 grants in accordance with the U.S. Department of Housing and Urban Development’s (HUD) requirements.
The Department did not administer its NSP1 and NSP3 grants in accordance with HUD’s requirements. Specifically, it did not deobligate grant funds in a timely manner, reallocate grant funds with proper justification, maintain adequate documentation to support grant expenditures, properly track program income, and ensure that six NSP activities met their national objectives. These conditions occurred primarily due to a lack of written and implemented policies and procedures. As a result, the Department (1) allowed more than $417,000 in grant funds to remain unused, (2) improperly reallocated $1.3 million in grant funds, (3) used more than $1.1 million in grant expenditures without adequate supporting documentation, (4) underreported at least $6.1 million in program income to HUD, and (5) drew down more than $11.9 million in grant funds without showing that a national objective was met.
We recommend that the Director of HUD’s Greensboro, NC, Office of Community Planning and Development require the Department to (1) reprogram and put $417,113 in NSP1 funds to better use, (2) support more than $2.4 million or reimburse its NSP grants from non-Federal funds, (3) reconcile and update the NSP program income reported to HUD, and (4) develop and implement a remediation plan to show that national objectives have been met as required to support more than $11.9 million in program funds. We also recommend that the Director review the Department’s expenditure of the remaining $736,088 in NSP1 grant funding before its drawdowns.
Recommendations
Community Planning and Development
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Status2019-AT-1004-001-AOpenClosed$417,113.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Put $417,113 in unspent NSP1 funds associated with three activities to better use by reprogramming the funds to other subrecipients using an appropriate method or return the funds to HUD.
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Status2019-AT-1004-001-BOpenClosed$1,300,000.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Support or reimburse its NSP1 grant $1,300,000 from non-Federal funds for the unsupported reallocation of grant funds.
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Status2019-AT-1004-001-COpenClosedClosed on Septiembre 07, 2022
Establish and implement a written policy and procedures to recapture and reallocate unused NSP funds in a timely manner.
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Status2019-AT-1004-001-DOpenClosed$1,186,105.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Support or reimburse the appropriate NSP grant $1,186,105 from non-Federal funds for the unsupported subrecipient and administrative expenditures.
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Status2019-AT-1004-001-EOpenClosedClosed on Agosto 12, 2020
Update its records retention policy to meet HUD’s records retention requirements for supporting documentation for Federal program expenses, including salaries.
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Status2019-AT-1004-001-FOpenClosed
Update the NSP program income information in HUD’s grant tracking system and quarterly performance reports and reconcile with the Department’s records.
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Status2019-AT-1004-001-GOpenClosed
Establish and implement written procedures and provide adequate training to staff associated with administering the NSP grant to help ensure accurate reporting of program income.
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Status2019-AT-1004-001-HOpenClosed$11,916,072.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on Agosto 04, 2020Develop and implement a remediation plan for the six NSP activities to show that the national objectives have been met as required to support $11,916,072 in program funds drawn or reimburse its program from non-Federal funds.
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Status2019-AT-1004-001-IOpenClosedClosed on Noviembre 16, 2020
Work with the Department so that it plans properly to ensure that the six activities identified in this report meet a national objective thereby avoiding extended project delays.
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Status2019-AT-1004-001-JOpenClosedClosed on Noviembre 16, 2020
Review the Department’s remaining NSP grant expenditures before its drawdowns to ensure that the expenditures are eligible and adequately supported.