We completed an audit of the City of Rome, New York's (City) administration of its Community Development Block Grant (CDBG) program. The objectives of our audit were to determine whether the City (1) administered its CDBG program effectively, efficiently, and economically in accordance with applicable rules and regulations and (2) expended CDBG funds for eligible activities that met a national objective of the program.

The audit disclosed that the City did not always carry out its activities effectively, efficiently, and economically in compliance with HUD regulations. Further, it expended CDBG funds for activities that did not meet a national objective of the program. Specifically, the City did not (1) adequately monitor a subrecipient-administered economic development revolving loan fund activity to ensure that performance goals were achieved, (2) establish adequate administrative and management controls to ensure that costs associated with a public facilities subrecipient and self-administered street improvement activities were eligible and met a national objective of the CDBG program, and (3) establish adequate controls to ensure that performance goals for subrecipient-supported activities were achieved. Consequently, the City's revolving loan fund activity expended program funds in an inefficient manner that did not effectively address program objectives, and ineligible and unsupported costs were expended for the planned renovation of a building previously owned by a subrecipient and for the purchase of ornamental streetlights. In addition, no progress had been made on a subrecipient rehabilitation and preservation activity, and a national program objective was not met, thus depriving other worthwhile activities of program resources. As a result, the revolving loan fund activity was deprived of program income that could have been used to make additional loans and create more jobs, and the City's ability to administer its programs efficiently and effectively and ensure that CDBG program objectives were met was diminished.

We recommend that HUD instruct the City to (1) reimburse the CDBG program from nonfederal funds the $140,523 paid for ineligible program expenditures, (2) provide supporting documentation to justify the eligibility of $58,036 in questionable CDBG disbursements or reimburse the program from nonfederal funds any amounts not supported, (3) establish procedures to ensure adequate monitoring of subrecipient-administered activities, and (4) comply with CDBG program requirements.