We performed an inspection to determine whether HUD had appropriately recaptured unspent funds awarded from the more than $5.3 billion in Community Development Block Grant Disaster Recovery funding appropriated before 2005.  According to HUD data, as of August 2008, grant awards totaling $4.7 billion had no unspent funds; 121 grant awards had unspent funds, of which HUD recaptured or deobligated more than $17.5 million.

Our inspection disclosed that HUD did recapture and deobligate unspent pre-2005 Disaster Recovery grant funds from expired grant contracts, as required.  Unspent funds were recaptured or deobligated through HUD’s Line of Credit Control System as the grants expired.  However, we noted three observations that warrant management attention. First, HUD did not ensure that expired Disaster Recovery grants were closed out and unspent grant funds were recaptured or deobligated on a timely basis.  Second, the Disaster Recovery Grant Reporting (DRGR) system did not contain accurate information regarding the closeout status of expired Disaster Recovery grants.  Finally, closeout documentation was missing from five Disaster Recovery grant files we reviewed.

HUD’s oversight of Disaster Recovery grants can be improved by implementing steps that ensure (1) closeout of disaster grants and recapture of unspent grant funds is completed timely, (2) correct and timely grant status information is entered into the DRGR system, and (3) that formal closeout documents are included in the grant files.