We completed an audit of the City of Buffalo, NY (City) pertaining to its administration of its supplemental Community Development Block Grant (CDBG) program funded under the American Recovery and Reinvestment Act of 2009. We selected the City based on concerns identified in our completed audit of the City’s CDBG program, Audit Report Number 2011-NY-1010 issued April 15, 2011. Our audit objectives were to determine whether the City efficiently and effectively administered its CDBG-Recovery Act (CDBG-R) program in compliance with Recovery Act and other applicable requirements. Specifically, whether City officials had adequate policies and procedures to ensure that (1) program funds drawn from HUD’s Line of Credit Control System were supported with adequate documentation and (2) CDBG-R program expenditures were for eligible activities that met a national objective of the program.
City officials did not always administer the CDBG-R program in accordance with applicable rules and regulations. Specifically, City officials (1) disbursed CDBG-R program funds for questionable street repaving and curb and sidewalk replacement expenditures and (2) failed to administer the City’s housing rehabilitation loan program in accordance with its own procedures and subcontractor agreement. As a result, program funds were used for unsupported capital improvements and emergency rehabilitation loan expenditures. Consequently, City officials could not assure HUD that all CDBG-R disbursements complied with HUD rules and regulations and that the program’s objectives were met.

We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to (1) provide documentation to justify the more than $1.5 million in unsupported costs for questionable CDBG-R and fiscal year 2010 CDBG street repaving and curb and sidewalk replacement expenditures; (2) reprogram the remaining $159,388 in obligated and unobligated street repaving and curb and sidewalk replacement project funds if there is a lack of capacity, to ensure that these funds are put to better use for other eligible program activities; (3) provide documentation to justify the $249,312 in unsupported costs for housing rehabilitation repairs, and (4) suspend incurring costs for CDBG-R capital improvement activities until HUD determines whether City officials have the capacity to complete these activities in compliance with HUD regulations.