The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, audited the City of Kansas City, MO’s Neighborhood Stabilization Program I (NSP I) based on previous problems in the City’s Community Development Block Grant program and the amount of funding it received.  During fiscal year 2008, the City received more than $7.3 million in NSP1 funding.  Our audit objectives were to determine whether the City properly obligated its NSP1 grant funds and allowed its subrecipient to enter into contracts without the required provisions.

The City improperly obligated $63,494 of its NSP1 funds.  It improperly obligated $14,467 when it used estimated instead of actual amounts and $49,027 when it used amounts based on contracts signed after the obligation deadline of September 19, 2010.  The City also allowed its subrecipient to enter into contracts without all of the required provisions.  None of its seven contracts between the subrecipient and its primary property developers included all required provisions. 

We recommend that HUD require the City to develop and implement a system to track its subrecipient’s obligation of NSP1 funds and develop and implement detailed operational policies and procedures to ensure proper obligation of NSP1 funds.  In addition, we recommend that HUD require the City to work with its subrecipient to amend its NSP1-funded contracts to include the missing provisions and adequately train its staff regarding the provisions required in NSP1-funded contracts.