We audited the Jersey City Housing Authority’s (Authority) administration of its Replacement Housing Factor (RHF) grants received under the capital fund program. This is the third audit report regarding the Authority’s capital fund programs. We selected the Authority because of the size of its capital fund programs and because of its U.S. Department of Housing and Urban Development (HUD) risk rating. Our audit objective was to determine whether the Authority obligated and expended its RHF grants in accordance with HUD regulations.

Authority officials did not always obligate or expend RHF funds in a timely manner. They failed to obligate at least 90 percent of the Authority’s 2007 RHF grants within 24 months and disburse 100 percent of its 2004 RHF grants within 48 months of the date of availability of the funds. This deficiency was the result of a lack of adequate controls and procedures to ensure that RHF funds were obligated and expended within the prescribed time limits. Consequently, $877,607 of the Authority’s 2007 RHF funds was not obligated, and more than $2.2 million of its 2004 RHF funds was not expended within the specified period according to HUD regulations. Therefore, not all needed capital improvements were accomplished within program time limits.

We recommended that the Director of HUD’s New Jersey Office of Public Housing (1) recapture more than $3.1 million in RHF capital funds or reduce future capital funds by this amount because of the delayed obligation and expenditure of these funds, and (2) direct Authority officials to establish and implement procedures to ensure that the Authority obligates and expends its capital fund grants within 24 and 48 months, respectively, from the date that funds become available to the Authority.