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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.