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The U.S. Department of Housing and Urban Development's Office of Inspector General audited the City of Cincinnati's (City) Neighborhood Stabilization Program. The audit was part of the activities in our fiscal year 2009 annual audit plan. We selected the City based upon the results of our three previous audits of the City's HOME Investment Partnership Program (HOME). Our objective was to determine whether the City had the capacity to effectively and efficiently administer its Neighborhood Stabilization Program.

The City did not have sufficient capacity to effectively and efficiently administer its Neighborhood Stabilization Program. It lacked adequate policies, procedures, and controls to ensure that Neighborhood Stabilization Program funds are used effectively and efficiently and in accordance with applicable requirements. Further, the City did not have sufficient staff to assist in administering the Neighborhood Stabilization Program to ensure that it has sufficient capacity to effectively and efficiently administer program funds. Lastly, we found that HUD's Columbus Office of Community Planning and Development did not include special conditions in its Neighborhood Stabilization Program grant agreement with the City.

We recommend that the Director of HUD's Columbus Office of Community Planning and Development require the City to: (1) implement adequate policies, procedures, and controls to ensure that Neighborhood Stabilization Program funds are used effectively and efficiently and in accordance with applicable requirements; and (2) hire additional staff and/or contract with another organization to assist in administering the Neighborhood Stabilization Program to ensure that it has sufficient capacity to effectively and efficiently administer program funds. This may require the City to revise its budget by reallocating planning and administrative costs that could be directly charged to Neighborhood Stabilization Program activities as delivery costs to the specific activity costs within the budget and/or reorganize its staff.

We also recommend that the Director of HUD's Columbus Office of Community Planning and Development include special conditions in its Neighborhood Stabilization Program grant agreement with the City. The special conditions should include but not be limited to (1) requiring the City to submit documentation describing how past HOME program performance issues were resolved or are now being resolved and explain whether they will impact the administration of the Neighborhood Stabilization Program, (2) performing additional monitoring, and (3) providing technical assistance to the City.