We audited the New Orleans Redevelopment Authority (Authority), a $29.7 million U.S. Housing and Urban Development (HUD) Neighborhood Stabilization Program 2 (NSP 2) grantee. We initiated the audit as part of the HUD Office of Inspector General’s (OIG) annual audit plan to review programs funded by the American Recovery and Reinvestment Act of 2009 (Recovery Act). Our objective was to determine whether the Authority’s use of the NSP 2 funding, including the propriety of its ongoing activities, obligations, reports to HUD, and expenditures, was in accordance with Federal regulations.

The Authority did not always use its NSP 2 funds in accordance with Federal regulations. This condition occurred because the Authority (1) did not have adequate controls and/or policies and procedures, (2) did not follow its own policies and procedures, and (3) was not always aware of its responsibilities as a HUD grantee under NSP 2. As a result, the Authority could not provide reasonable assurance that it had adequately fulfilled the requirements of its agreement with HUD and the Authority and one of its consortium members improperly procured eight contracts. In addition, the Authority expended $178,148 in questioned costs. Further, at least $8,101,539 of the remaining funds is at risk of being misspent and, therefore, not serving NSP 2’s purpose, to stabilize neighborhoods, the viability of which has been and continues to be damaged by the economic effects of properties that have been foreclosed upon and abandoned.

We recommend that HUD’s Director of Community Planning and Development require the Authority to (1) establish policies and procedures regarding environmental reviews; (2) establish an internal audit function; (3) revise its appraisal, monitoring, procurement, and finance policies; (4) terminate its existing contract and ongoing services for its commercial appraisal services; (5) implement internal controls to adequately track NSP 2 costs; (6) revise and submit its cost allocation plan to HUD for review and approval; (7) establish and implement policies and procedures regarding NSP 2 reporting; (8) support or repay $178,148 in questioned costs, and (9) support the cost reasonableness for eight NSP 2-funded contracts.

We also recommend that HUD’s Director of Community Planning and Development (1) provide the Authority with training related to NSP 2 and other requirements, (2) closely monitor the Authority’s expenditure and procurement activities for the duration of the Authority’s NSP 2 grant or until HUD is satisfied that the NSP 2 expenditures and procurements meet Federal requirements, and (3) review the Authority’s listing of potential NSP 2-assisted properties to ensure eligibility and the accuracy of information. In addition, we recommend that HUD ensure that the Authority corrects all of the deficiencies noted throughout the report, conduct a risk analysis of the Authority, and provide the Authority with ongoing monitoring and technical assistance throughout the duration of the grant, thereby ensuring that at least $8,101,539 in program funds can be better used and used for eligible activities.