We audited the City of San Diego's (City) Community Development Block Grant (CDBG) program in response to a hotline complaint alleging that the City and its Redevelopment Agency (Agency) were violating U.S. Department of Housing and Urban Development (HUD) rules and regulations. Our main objective was to address the citizen complaint and determine whether the City administered CDBG loans issued to the Agency in accordance with HUD rules and regulations. We found that the City failed to properly administer CDBG funds provided to the Agency in accordance with HUD requirements. For all 35 redevelopment projects sampled, the City did not (1) enter into required agreements with the Agency, (2) list the projects in the action plan or subsequent amendments to HUD, and (3) failed to monitor the project activities, resulting in more than $1.8 million in ineligible and $11 million in unsupported costs. The City also failed to execute loan agreements and repayment schedules for CDBG funded loans issued to the Agency with an overall principal and interest balance of more than $139 million, and the Agency did not make consistent good faith efforts to repay the CDBG loans so the program income could be used for eligible CDBG activity. We recommend that HUD require the City to pay back ineligible costs of more than $1.8 million plus any applicable interest to HUD from nonfederal funds, provide supporting documentation or reimburse HUD more than $11 million from nonfederal funds, execute written interagency agreements and loan agreements with the Agency for outstanding CDBG loans, and implement procedures and controls to ensure that the City and the Agency adequately monitor CDBG activity.