We audited Sasha Bruce Youthwork, Incorporated (Youthwork, Inc.) to determine whether it used its Youthbuild and Supportive Housing program grant funds in accordance with U.S. Department of Housing and Urban Development (HUD) regulations and its grant agreements. We found that Youthwork, Inc., did not support the eligibility of more than $1.9 million in expenditures. Youthwork, Inc., failed to maintain records identifying the source and application of funds for its HUD-sponsored activities as required by HUD regulations and its grant agreements. Its accounting system did not separately track expenses paid by HUD versus expenses paid through other funding sources. This condition occurred because responsible officials disregarded HUD requirements. Therefore, HUD had no assurance that $1.9 million in grant funds it disbursed to Youthwork, Inc., were used for eligible activities that met the intent of its grant agreements.

We recommend that the Director of HUD’s Office of Community Planning and Development, Washington, DC, field office evaluate the issues in this report and if appropriate initiate appropriate administrative actions against responsible officials of Youthwork, Inc. We also recommend that the Director of HUD's Office of Community Planning and Development require Youthwork Inc., to provide documentation to demonstrate that more than $1.9 million was used for eligible activities or repay HUD from non-Federal funds, improve its financial management system and implement improved accounting procedures to ensure that it meets the requirements of regulations at 24 CFR (Code of Federal Regulations) 84.21 and Office of Management and Budget Circular (OMB) A-110. At a minimum, the financial management system should maintain accounting records that (1) track expenses paid by HUD versus expenses paid through other funding sources; (2) demonstrate that expenditures paid were for eligible activities; (3) determine and adequately document the reasonableness, allocability, and allowability of costs; and (4) demonstrate that expenditures meet HUD-approved budget line items, thereby ensuring that more than $686,342 in program funds will be used for eligible purposes.