We completed a review of the City of Jersey City, NJ’s Community Development Block Grant (CDBG) program in response to a hotline complaint. The objectives of the audit were to determine whether allegations included in the complaint had merit and whether City officials had established and implemented adequate controls to ensure that the City’s CDBG program was administered in compliance with CDBG program requirements.
Our review determined that some complaint allegations had merit, and others could not be substantiated. The City’s CDBG program was not always administered in compliance with program requirements. Specifically, (1) program income was not always collected, recorded, or supported; (2) funds were used for unsupported costs; (3) CDBG activities and the City’s home-ownership program were not administered in compliance with program requirements; (4) unnecessary drawdowns were made; and (5) the City’s Integrated Disbursement and Information System (IDIS1) information was not accurate or traceable to that in its accounting records. As a result, more than $12.6 million2 was not made available for eligible activities; more than $1.6 million and $9,813 were used for unsupported and ineligible costs, respectively; more than $1.9 million was spent on properties without recorded mortgages to ensure compliance with program requirements; $148,000 was unsupported program income; $605,672 was misclassified in IDIS; and there was no assurance that more than $1.1 million in future Section 108 income would be recorded in IDIS.
We recommend that HUD instruct City officials to (1) reimburse more than $11.5 million in program income to the City’s CDBG bank account, (2) record Section 108 income of $930,241 and program income of $51,860 in IDIS, (3) provide support for more than $1.8 million in unsupported program income and costs, (4) record mortgages so that HUD’s interest of more than $1.9 million is protected, (5) reimburse $110,795 to the CDBG line of credit for ineligible and unreasonable costs, (6) reclassify $605,962 in IDIS, and (7) strengthen controls to ensure that more than $1.1 million in future Section 108 income will be recorded in IDIS.
1 IDIS is the drawdown and reporting system for HUD’s Office of Community Planning and Development formula grant programs.
2 This amount consists of amounts included in recommendations 1A, 1B, 1C, and 2B.
Recommendations
Community Planning and Development
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Status2016-NY-1007-001-AOpenClosed$11,532,769.00Funds 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.
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to reimburse the City’s CDBG local bank account for the $11,532,769 in uncollected program income generated from the disposition of real property previously assisted with CDBG funds, thus ensuring that these funds can be used for eligible activities.
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Status2016-NY-1007-001-EOpenClosed$148,000.00Questioned 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.
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to provide documentation to support whether $148,000 in CDBG program income was generated from the disposition of real properties acquired with CDBG funds so that HUD can determine eligibility. Any recognized program income should be reimbursed to the City’s local bank account and recorded in IDIS, thus ensuring that these funds can be put to better use.
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Status2016-NY-1007-001-IOpenClosed$1,475,674.00Funds 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.
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to record the mortgages on the five CDBG-assisted properties that were demolished and acquired with CDBG assistance of $1,475,674, thus ensuring that these properties are administered in compliance with program requirements.
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Status2016-NY-1007-001-JOpenClosed$270,959.00Questioned 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.
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to provide documentation, such as proof of advertising, bids received, bid analysis reports, cost estimates, contracts, and other applicable records, to support compliance with Federal procurement regulations in the awarding of the five contracts.
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Status2016-NY-1007-001-KOpenClosed
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to provide documentation to support compliance with Federal procurement regulations when contracts were awarded to the three single bidders.
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Status2016-NY-1007-001-LOpenClosed
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to provide documentation to support the eligibility of the three tenants occupying low- to moderate-income housing units at a residential property assisted with CDBG funds.
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Status2016-NY-1007-001-NOpenClosed
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to provide documentation to support that those laborers employed by the four contractors are compensated in accordance with Davis-Bacon wage rates. If documentation cannot be provided, the City’s line of credit should be reimbursed from non-Federal funds for disbursements made to the four contractors.
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Status2016-NY-1007-001-POpenClosed$30,600.00Questioned 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.
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to provide documentation to support the income eligibility of the homeowner who received $30,600 in CDBG funds related to the rebate program. If documentation cannot be provided, the City’s CDBG program line of credit should be reimbursed $30,600 from non-Federal funds.
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Status2016-NY-1007-001-ROpenClosed$9,730.00Questioned 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.
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to reimburse $9,730 from non-Federal funds to the City’s CDBG program line of credit for the ineligible homeowner rehabilitation assistance provided that exceeded the subsidy limit.
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Status2016-NY-1007-001-SOpenClosed$83.00Questioned 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.
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to reimburse $83 from non-Federal funds to the City’s CDBG program line of credit for disbursements made for the two contracts exceeding 10 percent of the cost estimate.
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Status2016-NY-1007-002-BOpenClosed$100,982.00Questioned 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.
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to reimburse the City’s CDBG program line of credit for $100,982, which was used to pay costs that had been paid with CDBG program income, thus ensuring that these funds can be used for eligible activities.