HUD OIG conducted this audit based on a confidential complaint submitted through the U.S. Department of Housing and Urban Development (HUD) Office of Inspector General (OIG) hotline. The complaint alleged several improprieties involving the County’s NSP and HOME programs. Our objectives were to determine whether the County (1) complied with requirements in the procurement, award, and execution of its NSP administrative contract and (2) incurred reasonable and eligible NSP and HOME expenditures for administrative and construction contract services.

While implementing its NSP the County did not comply with requirements that governed procurements, safeguard of assets, and accurate reporting of NSP obligations. The number and significance of the procurement violations brings into question the County’s capacity to implement future NSP activities in accordance with competitive contracting requirements. The County also did not take proper actions to protect the ownership of abandoned and foreclosed-upon properties acquired with NSP funds or the revenues expected from their disposition. The violations put more than $6.1 million at risk because the County allowed a nonprofit entity, with whom it had no contract, to acquire abandoned and foreclosed-upon properties in its name without title restrictions and sell the properties. In addition, the County did not accurately report NSP acquisition obligations in HUD’s Disaster Recovery Grants Reporting (DRGR) system and did not post NSP performance reports to its Web page in a timely manner.

While implementing its HOME program, the County did not require its community housing development organization (CHDO) to comply with its contract that required it to obtain competitive bids for procurements. As a result, the CHDO did not have documentation to support the reasonableness of more than $1.2 million in construction contract costs examined during the review. We used an OIG staff appraiser to review a sample of the construction costs, and we determined that the costs were reasonable. However, the violations reflected a lack of attention by County and CHDO officials to their obligation to enforce contract procurement requirements for construction costs paid with HOME funds.

OIG recommends that HUD require the County to terminate its NSP administrative contract and arrange for the continued administration and implementation of its NSP by County staff or a properly procured contractor; reimburse the NSP more than $4.4 million if title to NSP acquired properties is not transfered to the County or an entity with the legal authority to hold the titles; establish proper safeguards over its NSP funds; and reimburse more than $98,000 for questionable fees. We also recommend that HUD review and determine the accuracy of NSP obligations made after the completion of our on-site review and ensure that the County post its quarterly NSP performance reports to its Web page; and ensure that that its CHDO comply with procurement requirements.