We recommend that Deputy Assistant Secretary for Grant Programs take action to correct and address the DRGR system material internal control weaknesses identified in this report.

Repay from non-Federal funds the $422,768 in ineligible funds related to the City’s failure to meet HOME CHDO commitment deadlines and complete activities in accordance with the HOME agreement and HOME regulations.

Reallocate the $487,483 in unspent funds to ensure that they will be put to their intended use or, if the activities remain open, maintain support to show that the HOME funds disbursed were reasonable and Reallocate the $487,483 in unspent funds to ensure that they will be put to their intended use or, if the activities remain open, maintain support to show that the HOME funds disbursed were reasonable and supported in accordance with Federal requirements.

Identify, review, and approve a CHDO to work with the City to ensure that $254,215 in CHDO funds will be properly committed to avoid being deobligated.

Establish underwriting policies and procedures to ensure that HOME activities are consistent and meet Federal requirements.

Develop and implement adequate environmental policies and procedures to ensure that environmental reviews are properly documented and supported and that HUD and Federal environmental requirements have been followed before committing HOME funds to an activity.

Develop and implement adequate policies and procedures to ensure that fixed HOME units are identified and adequate documentation is maintained to support tenant eligibility and compliance with HOME rental limits for the entire affordability period.

Develop and implement tools to improve record-keeping practices to support the eligibility, necessity, and reasonableness of the HOME activities.

Provide technical assistance to the City to ensure that responsible staff receives necessary environmental, underwriting, and overall program administration training.

Provide supporting documentation for the participant’s eligibility (tenant code t0019221) or repay its program $13,885 from non-Federal funds for the housing assistance payments and any subsequent payments made.

Provide support for the administrative fees or repay the Continuum of Care grants $663,070 from non-Federal funds. (See appendix D.)

Submit an indirect cost rate schedule for its Continuum of Care grants to HUD for approval.

Develop and implement written policies and procedures for its administrative fee charges.

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 reimburse from non-Federal funds the $783,571 paid to purchase two properties that did not comply with flood hazard requirements and for which the State did not have sufficient documentation to show that the properties were 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 support the hardship letter provided for a property located outside the 500-year floodplain and documentation to show that the property was substantially damaged or reimburse from non-Federal funds the $435,069 in settlement costs paid to purchase the property. Further, the State should identify and reimburse from non-Federal funds any additional Disaster Recovery funds used to acquire and dispose of the property.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to reimburse from non-Federal funds the $183,500 in incentives paid to a homeowner that failed to maintain flood insurance.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that the five properties for which the homeowners failed to maintain flood insurance were eligible for assistance and documentation to show that the properties were substantially damaged or reimburse from non-Federal funds the $1,336,883 paid to purchase the properties, including incentives for one property. 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 State to conduct a review of the universe of properties purchased through the acquisition component of its program to ensure that properties were eligible and reimburse from non-Federal funds the Disaster Recovery funds used in connection with any additional properties found to be ineligible. For example, the State’s review could include verification that (1) its files contained the required substantial damage letters, (2) the letters provided by applicants reflected the most recent substantial damage determination made by local officials, (3) substantial damage determinations were adequately supported, (4) properties met flood hazard requirements, and (5) properties were not FEMA-noncompliant.