This is the tenth report in our ongoing audits of the Lower Manhattan Development Corporation's (the auditee) administration of the Community Development Block Grant Disaster Recovery Assistance funds provided to the State of New York. During our audit period, April 1, 2007, through September 30, 2007, the auditee disbursed approximately $132.7 million of the $2.783 billion funds appropriated. The objectives of this audit were to determine whether the auditee (1) disbursed Disaster Recovery Assistance funds in accordance with the guidelines established under U.S. Department of Housing and Urban Development (HUD)-approved partial action plans, (2) expended Disaster Recovery Assistance funds for eligible administration and planning expenses in accordance with applicable laws and regulations, and (3) had a financial management system in place that adequately safeguarded funds and prevented misuse.

The auditee generally disbursed the $132.7 million in Disaster Recovery Assistance funds in accordance with HUD-approved action plans, expended funds for eligible administration and planning expenses in accordance with applicable laws and regulations, and maintained a financial management system that adequately safeguarded funds and prevented misuse. However, an internal control weakness existed in the management of grant repayments in the Employment Training Assistance Program. The subrecipient that administered the program credited 10 grant recipient repayments to the wrong HUD grant and did not return recovered funds to HUD's Line of Credit Control System in a timely manner. We recommend that HUD's General Deputy Assistant Secretary for Community Planning and Development require the auditee to strengthen controls to ensure that future grant repayments to the Employment Training and Assistance Program are properly recorded and credited to the correct HUD grant.