Put $417,113 in unspent NSP1 funds associated with three activities to better use by reprogramming the funds to other subrecipients using an appropriate method or return the funds to HUD.

Support or reimburse its NSP1 grant $1,300,000 from non-Federal funds for the unsupported reallocation of grant funds.

Support or reimburse the appropriate NSP grant $1,186,105 from non-Federal funds for the unsupported subrecipient and administrative expenditures.

Update the NSP program income information in HUD’s grant tracking system and quarterly performance reports and reconcile with the Department’s records.

Establish and implement written procedures and provide adequate training to staff associated with administering the NSP grant to help ensure accurate reporting of program income.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to support the appraised fair market values of the 14 properties sampled to ensure that $5,920,097 in settlement costs was supported. This recommendation includes but is not limited to providing support to show that appraisals contained accurate and verified information for the subject and comparable properties, time adjustments were supported, and other adjustments were supported. If support cannot be provided, the State should reimburse the unsupported costs from non-Federal funds.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to support the appraised fair market values of the 942 other properties included in our sampling universe to ensure that $361,465,173 in settlement costs was supported. This recommendation includes but is not limited to providing support to show that appraisals contained accurate and verified information for the subject and comparable properties, time adjustments were supported, and other adjustments were supported. If support cannot be provided, the State should reimburse the unsupported costs from non-Federal funds.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to strengthen controls over the property valuation process for its program to ensure that up to $93,350,616 not yet disbursed is put to better use. This recommendation includes but is not limited to implementing a process to review the appraisal and quality control work to ensure that appraised fair market values are supported and that quality control reviews are performed as required by Federal, State, and industry standards and to take appropriate action for cases in which the work does not comply with requirements.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that $3,119,209 paid for appraisals and poststorm addenda performed by its contractor was reasonable, supported, and for services that were performed in accordance with applicable requirements or reimburse any unsupported costs from non-Federal funds.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that $156,940 paid for sales brochures, economic land analysis studies, and consultant fees was reasonable, necessary, supported, and for services that were performed in accordance with applicable requirements or reimburse any unsupported costs from non-Federal funds.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that $75,006 used for appraisal quality control reviews was for services that complied with applicable requirements or reimburse any unsupported costs from non-Federal funds.

Design controls to protect the insurance fund from improper partial claims that did not reinstate the loans to put $27.1 million to better use.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to reimburse from non-Federal funds the $2,595,127 paid to purchase six properties that were not substantially damaged. Further, the State should identify and reimburse from non-Federal funds any additional Disaster Recovery funds used to acquire and dispose of the properties.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that the remaining nine properties were substantially damaged or reimburse from non-Federal funds the $4,158,836 paid to purchase the properties. Further, the State should identify and reimburse from non-Federal funds any additional Disaster Recovery funds used to acquire and dispose of the nine properties.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the City to provide documentation to show that the $594,012 disbursed due to the use of multipliers was for eligible, reasonable, necessary, and supported costs or reimburse its program from non-Federal funds.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the City to provide documentation to show that the $2,689 disbursed due to a higher than required overtime rate was supported by documentation from the trade unions or reimburse its program from non-Federal funds.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the City to reimburse its program $1,198 from non-Federal funds for overpaid wages due to billing and payroll errors.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the City to pay $544 in unpaid wages to the subcontractors of the affected employees and submit evidence that these employees have been paid.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the City to provide documentation showing that payments made under the Rockaway Boardwalk construction management services contract complied with Davis-Bacon and Related Acts requirements and that restitution is made to affected workers for any underpayments identified.

Implement a change to regulations at 24 CFR Part 203 to require curtailment of preforeclosure interest and other costs that are caused by lender servicing delays, resulting in $413,513,975 in funds to be put to better use. This should include updating or seeking statutory authority to update HUD’s regulations as necessary and coordinating with HUD’s Office of Finance and Budget, well before any changes go through departmental clearance, to ensure that planned curtailment requirements can be consistently enforced through the claims process.

Status

FHA reported that the audit recommendation cannot be closed without the publication of the FHA Maximum Claim Rule. The proposed changes have been on HUD’s regulatory agenda since Spring 2020 but, as of July 2025, the Office of Single Family Housing does not have an estimated publication date.

Analysis

To fully address this recommendation, HUD must provide evidence that it has published and adopted the rule.

Implementation of this rule should result in HUD putting $413 million to better use.