We audited the City of Baton Rouge and Parish of East Baton Rouge’s (City) Community Development Block Grant (CDBG) program as part of the Office of Inspector General’s annual audit plan to review community planning and development funds. The audit objective was to determine whether the City properly administered and adequately documented its CDBG program activities in accordance with U.S. Department of Housing and Urban Development (HUD) regulations.
We found that the City did not always properly administer and adequately document its CDBG program activities in accordance with HUD regulations. Specifically, it did not maintain documentation supporting that its projects met a national objective and did not ensure that subrecipients met agreement terms. In addition, it did not follow procurement requirements as it did not always have documentation showing that it performed independent costs estimates and ensured full and open competition for some contracts and the contracts did not include all required contract provisions. Further, the City inappropriately used CDBG administrative funds to pay for other HUD program costs and could not always support how it determined amounts it repaid to the CDBG program or reconcile costs charged and funds repaid. These conditions occurred because the City did not follow HUD requirements, have CDBG program-specific written policies, and have an adequate payroll computer system. Additionally, it had a limited number of staff members, who were not properly trained, and relied on its CDBG funding to cover shortfalls in other programs. As a result, it could not support that it used more than $1.5 million in accordance with requirements or the cost reasonableness of more than $670,000 or provide HUD with reasonable assurance that it properly used its program funds.
We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to (1) support or repay more than $2.2 million, (2) amend its active contracts, (3) immediately stop using CDBG funds for other program costs, (4) provide a full reconciliation of its administrative expenditure and transfer transactions and repay any unsupported or ineligible costs identified, (5) develop CDBG program-specific policies, (6) train its staff, (7) maintain complete files, and (8) update its payroll computer system.