The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited HUD's Office of Affordable Housing Programs’ (Office) oversight of HOME Investment Partnerships Program (Program) income (including recaptured Program funds). The audit was part of the activities in our fiscal year 2009 annual audit plan to contribute to improving HUD’s execution and accountability of its fiscal responsibilities and our strategic plan to help HUD resolve its major management challenges. Our objectives were to determine whether HUD’s Office had adequate oversight of Program income to ensure that participating jurisdictions disbursed Program income before drawing down Program funds and reported Program income in HUD’s Integrated Disbursement and Information System (System) accurately and in a timely manner.

HUD’s Office did not ensure that participating jurisdictions complied with HUD’s requirements in their use of Program income and properly reported Program income in HUD’s System. At least 29 of the 45 participating jurisdictions selected for review inappropriately drew down more than $79.4 million in Program funds from their HOME trust fund treasury accounts (treasury account) from January 1, 2007, through December 31, 2008, when they had available Program income. Of the 29 participating jurisdictions, 26 had more than $39.6 million in available Program income as of December 31, 2008, associated with their inappropriate drawdowns of Program funds. In addition, at least 38 of the participating jurisdictions did not report Program income in HUD’s System accurately and/or in a timely manner from January 1, 2007, through December 31, 2008.

We recommend that HUD’s General Deputy Assistant Secretary for Community Planning and Development require the Office to ensure that the 26 participating jurisdictions disburse the more than $39.6 million in available Program income as of December 31, 2008, for eligible housing activities and/or administrative costs before drawing down Program funds from their treasury accounts, as appropriate, and implement adequate procedures and controls to address the findings cited in this audit report.