We audited the City of Durham (City), North Carolina 's HOME Investment Partnerships (HOME) program as part of our annual audit plan. Our audit objectives were to determine whether the City complied with U.S. Department of Housing and Urban Development (HUD) requirements for monitoring HOME subrecipients and recording and using HOME program income.

The City did not always perform required monitoring reviews or provide adequate evidence that monitoring reviews were performed. As a result, the City and HUD lacked assurance that HOME activities were conducted in accordance with the requirements or that the intended program benefits were realized. In addition, the City incorrectly used HOME entitlement funds when program income funds were available for use. The City also did not always make the required program income entries in HUD's Integrated Disbursement and Information System. As a result, the City's reporting to HUD was incorrect, and it unnecessarily drew down $158,223 to its local HOME Investment Trust Fund account.

We recommend that HUD require the City to establish and implement effective written policies and procedures for monitoring HOME activities and reporting and using program income. We also recommend that HUD require the City to repay interest earned on program income that was not reported in a timely manner and used for HOME activities. In addition, we recommend that HUD require the City to establish the eligibility of funds disbursed for tenant-based rental activities, recalculate tenant rents and refund any overcharged tenants, and reimburse HUD for any payments determined to be ineligible.