We completed an audit of the City of Jersey City’s (City) Community Development Block Grant (CDBG) float loan activity. Our audit objective was to determine whether the City ensured that CDBG funds used for the float loan complied with applicable rules and regulations.

The City did not comply with applicable regulations and failed to take timely action when the float loan defaulted. Specifically, it did not (1) make a good faith effort to collect payment on the float loan in the amount of $3.5 million, (2) identify a proper default remedy in case the float loan defaulted, (3) properly account for and report float loan program income to the U.S. Department of Housing and Urban Development (HUD), (4) follow the required steps when the terms of the float loan was extended, and (5) maintain adequate supporting documentation to show that the national objective was met.

We recommended that the Director of HUD’s New Jersey Office of Community Planning and Development instruct the City to reimburse the CDBG program from non-Federal funds in the amount of $3.5 million for the defaulted float loan; provide supporting documentation related to $72,517 in program income generated from the float loan, establish adequate policies and procedures to ensure that the City complies with applicable CDBG float loan rules and provide the supporting documents to show that the CDBG national objective was met.