We audited the U.S. Department of Housing and Urban Development (HUD), Office of Community Planning and Development’s (CPD) Section 108 Loan Guarantees program. We conducted the audit as part of our annual audit plan. Our audit objectives were to determine whether HUD had adequate oversight of Section 108 loans to ensure that funds were effectively used to meet a Community Development Block Grant national objective and fully provided the intended benefits and that borrowers complied with loan contract provisions.
HUD’s oversight of Section 108 loans was not adequate to ensure that funds were effectively used to meet program objectives and that borrowers complied with loan contract provisions. The Section 108 loans were not routinely included in HUD’s annual reviews. Specifically, of 14 loans reviewed, 12 totaling more than $102 million had not been monitored. As a result, HUD had no assurance that more than $24 million in Section 108 loans fully provided the intended benefits and met program objectives and that borrowers complied with program requirements.
We recommend that HUD (1) determine the eligibility of more than $15.8 million in unsupported Section 108 fund disbursements for activities that did not meet a national objective, (2) require borrowers to use more than $8.6 million in unused commitments to meet program objectives, (3) determine the eligibility of $75,000 disbursed for an activity without HUD approval, and (4) improve its monitoring policies, procedures, and tracking systems to ensure that borrowers comply with all loan contract provisions and that required documents are submitted.
Recommendations
Community Planning and Development
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Status2017-AT-0001-001-AOpenClosed$15,814,000.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on Marzo 30, 2018Reevaluate the feasibility of the two Section 108 activities that failed to meet a national objective and determine the eligibility of the $15,814,000 already invested. Any amount determined ineligible must be reimbursed to the program from non-Federal funds.
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Status2017-AT-0001-001-BOpenClosed$8,694,000.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Closed on Octubre 18, 2018Require the borrowers to submit a plan for how they will proceed and use the $8,694,000 million in unused commitments to provide the intended benefits and meet program objectives.
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Status2017-AT-0001-001-COpenClosed$75,000.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on Agosto 25, 2017Require the borrower to provide all supporting documentation and evaluate the allowability and eligibility of $75,000 used for the unauthorized activity. Any amount determined ineligible must be reimbursed to the program from non-Federal funds.
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Status2017-AT-0001-001-DOpenClosedClosed on Octubre 12, 2018
Develop procedures directing field offices to include the review of Section 108-funded activities when performing the annual reviews of Block Grant recipients.
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Status2017-AT-0001-001-EOpenClosedClosed on Octubre 12, 2018
Develop procedures to ensure that the information necessary to monitor program performance and compliance with program requirements is promptly provided to the field offices.
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Status2017-AT-0001-001-FOpenClosedClosed on Octubre 12, 2018
Implement procedures to ensure that borrowers comply with all loan contract provisions and that required documents are submitted, including bank agreements, monthly statements, and security documents. If a borrower does not provide evidence that it has complied with all program requirements, HUD must initiate appropriate remedial actions under paragraph 12 of the contract.
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Status2017-AT-0001-001-GOpenClosedClosed on Septiembre 07, 2018
Develop and implement a tracking system for monitoring reviews of Section 108 loans.