During the eighth in our series of ongoing audits of the Lower Manhattan Development Corporation's (LMDC) administration of the $2.783 billion in Community Development Block Grant Disaster Recovery Assistance funds provided to the State of New York following the September 11, 2001, terrorist attacks on the World Trade Center in New York City, we identified a concern about whether certain activities, for which funds have been disbursed and additional funds are planned to be disbursed under the Utility Restoration and Infrastructure Rebuilding (URIR) program, represent an appropriate expense of the program. Specifically, an analysis is warranted to determine whether URIR category two costs, approved via an amendment of internal program guidelines, to be incurred in connection with the southern site utility infrastructure, should have been approved via the action plan process. Further, when the amended action plan S-2 is submitted for approval, the proposed additional southern site costs warrant careful review to determine whether they are costs that were contemplated by the original program and whether some of those planned expenditures more appropriately should be charged to another program.

We recommend that HUD's general deputy assistant secretary for community planning and development instruct LMDC to (1) provide documentation so that HUD can determine whether the southern site activity added via program guidelines meets the criteria necessary to be included as part of the initial URIR program's objectives, and whether the utility work outlined for the southern site should have gone through the same action plan procedures as other activities. If the southern site disbursements do not meet the criteria of the program, LMDC should be instructed to seek repayment of the funds already advanced, and (2) when the amended partial action plan S-2 is submitted for HUD approval, provide additional specifics as to the activity to be funded via the proposed amendments to the partial action plan so that a determination can be made as to whether it is consistent with the congressional intent for the URIR program.