We completed the fifteenth audit report in our ongoing review of the Lower Manhattan Development Corporation’s (LMDC) administration of the $2.783 billion in Community Development Block Grant (CDBG) Disaster Recovery Assistance funds provided to the State of New York in the aftermath of the September 11, 2001, terrorist attacks on the World Trade Center in New York City. During the audit period, October 1, 2009 through March 31, 2010, LMDC disbursed $206.9 million of the $2.783 billion being administered.

The objectives of this audit were to determine whether LMDC disbursed CDBG Disaster Recovery Assistance funds for the Economic Development and East River Waterfront programs in accordance with the guidelines established under its action plans. LMDC officials generally disbursed the funds reviewed in accordance with applicable action plans. However, documentation for the award of Small Firm Assistance Program grants, administered under the Economic Development Program, was not always adequate to ensure that grants were awarded in accordance with LMDC guidelines. Further, additional program requirements could provide greater assurance that program objectives will be achieved.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct LMDC officials to (1) strengthen Small Firm Assistance Program processing controls to ensure that adequate documentation is maintained for the basis of awarding grants, thus providing greater assurance that any grants awarded from the $3.1 million authorized under a subrecipient agreement but not yet expended will be adequately supported, and (2) consider administrative changes that might better ensure that program objectives will be met.