As part of our annual plan, we audited the Office of Housing and Community Development, City of New Bedford, Massachusetts' (City) administration of its Community Development Block Grant (CDBG)) and HOME Investment Partnerships (HOME) programs. Our audit objective was to determine whether the City complied with U.S. Department of Housing and Urban Development (HUD) regulations in administering its CDBG and HOME programs.

The City generally administered its CDBG and HOME programs in accordance with HUD regulations. However, it did not always ensure that its subrecipients followed HUD requirements or met the program objectives of the subrecipent agreements. The City failed to ensure that two of its subrecipients followed HUD requirements for full and open competition regarding procurements for construction work. It also did not ensure that another subrecipient attained its program objectives of issuing the required number of loans and creating the required number of new jobs. In addition, the City did not ensure that this subrecipient properly collateralized CDBG funds on deposit in the same bank, or made loans that did not involve conflicts of interest. These problems occurred because the City did not always adequately monitor subrecipient activities or failed to ensure that its subrecipents always took corrective action. As a result, there is a lack of assurance that subrecipient procurements were fair and equitable and that the most favorable contract prices were obtained for $750,000 in construction funding. Also, more than $1 million in CDBG funding for loans and job creation may not have been the best use of HUD funds, CDBG funds totaling $188,177 were not adequately safeguarded against loss, and a subrecipient approved two loans that created apparent conflicts of interest.

We recommend that the director of the Office of Community Planning and Development in Boston require the City to (1) obtain a cost analysis for each subrecipient to support the $750,000 in CDBG funding provided for construction contracts, (2) ensure that the future use of CDBG funds creates the number of new jobs necessary to fulfill the requirements of past and current agreements to put current funding of $285,000 to better use, (3) obtain and provide evidence that CDBG funds in excess of Federal Deposit Insurance Corporation (FDIC) limits for the subrecipient are fully collateralized, and (4) ensure that the subrecipient establishes adequate policies addressing conflicts of interest including requirements for providing full disclosure.