The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited HUD’s Office of Block Grant Assistance’s (Office) controls over special conditions in Neighborhood Stabilization Program grant agreements under Title III of the Housing and Economic Recovery Act of 2008 (Act) as amended. The audit was part of the activities in our fiscal year 2010 annual audit plan. Our objective was to determine whether HUD’s Office ensured that HUD’s Office of Community Planning and Development field offices (field offices) were consistent in their consideration and inclusion of special conditions in Neighborhood Stabilization Program grant agreements with high-risk grantees.

HUD’s field offices used different procedures for including special conditions in Neighborhood Stabilization Program grant agreements under the Act. HUD’s Office did not ensure that the field offices were consistent in their consideration and inclusion of special conditions in Neighborhood Stabilization Program grant agreements with high-risk grantees.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require HUD’s Office to determine whether Neighborhood Stabilization Program grantees under the Act are high risk by considering grantees’ past performance or other serious actions in their HOME Investment Partnerships (HOME), Emergency Shelter Grant, and Supportive Housing programs. If the Neighborhood Stabilization Program grantees are high risk, they should be required to develop and implement management plans for their Neighborhood Stabilization Programs that will include but not be limited to describing how unresolved HOME, Emergency Shelter Grant, and/or Supportive Housing program performance issues were resolved or are being resolved and explain whether the issues will impact the administration of their Neighborhood Stabilization Programs.