We audited the City of Scranton, PA’s (City) Community Development Block Grant (CDBG) program. We selected the City for audit because of the size of its program, its high U.S. Department of Housing and Urban Development (HUD) risk analysis score, and a citizen’s complaint alleging misuse of HUD funds. The objectives of the audit were to determine whether the City (1) maintained records and documentation to identify the source and application of funds to demonstrate that funded activities were eligible and met program requirements, (2) established and maintained an effective system of budget controls for proper management of its CDBG program, and (3) properly monitored its subrecipients, in accordance with applicable HUD requirements. We found that the City failed to adequately administer its CDBG funds and could not demonstrate that it used more than $11.7 million in CDBG funds in accordance with applicable HUD requirements. Specifically, it (1) failed to maintain adequate records identifying the source and application of funds for its HUD-sponsored activities, (2) did not maintain required documentation and budget controls demonstrating that its expenditures complied with program requirements, (3) did not use proper subrecipient agreements, and (4) failed to adequately monitor its subrecipients. Additionally, it did not ensure that its activities complied with program requirements and allowed an apparent conflict-of-interest situation to exist. We recommend that HUD (1) perform additional monitoring and provide technical assistance to the City, as needed, to ensure that the City properly administers the CDBG funding in accordance with applicable requirements and (2) evaluate issues in this report and if appropriate, initiate appropriate administrative action against responsible officials. We further recommend that HUD direct the City to (1) provide documentation to demonstrate that more than $11.7 million was used for eligible activities that met the intent of its HUD-approved budget line items or repay HUD from non-Federal funds; and (2) improve its financial management system and implement improved accounting procedures to ensure that it meets the requirements of regulations at 24 CFR 85.20, Office of Management and Budget Circular A-87, and 24 CFR 570.506. We also recommend that HUD direct the City to (1) develop and implement controls to ensure that it monitors its subrecipients as required and maintains adequate documentation to support its monitoring efforts, and (2) revise its subrecipient agreement to comply with HUD requirements.