We audited the Niagara Falls Housing Authority’s HOPE VI grant program based on an Office of Inspector General risk analysis and the amount of funding the Authority received.  The objectives of the audit were to determine whether the Authority administered its HOPE VI grant program and activities in accordance with U.S. Department of Housing and Urban Development (HUD) and HOPE VI grant program requirements.

The Authority did not always administer its HOPE VI grant program and activities in accordance with requirements.  Specifically, contrary to Federal regulations and the HOPE VI grant agreement, Authority officials drew more HOPE VI funds from HUD’s Line of Credit Control System than were needed to cover project expenditures.  We attribute this deficiency to Authority officials incorrectly interpreting Federal regulations and the grant agreement requirements.  As a result, more than $1 million in phase I HOPE VI funds drawn was not applied to project expenditures.  In addition, the Authority earned $26,785 in accrued interest on these funds through February 2014, which should be returned to the U.S. Treasury.  Further, Authority officials drew $403,324 more in HOPE VI funds than was needed to meet its share of the development costs for phase II.

We recommend that HUD instruct Authority officials to (1) reimburse the U.S. Treasury for approximately $1.5 million in HOPE VI funds drawn in excess of need to cover project expenditures, and (2) establish procedures to ensure that program funds are drawn in accordance with the grant agreement and regulations.