We audited the City of Cedar Rapids, IA Property Acquisition Program. We selected the City for review based on a citizen’s hotline complaint and the amount of disaster funding received by the City. During fiscal years 2008 through 2011, the City’s property acquisition program was awarded more than $125 million in disaster funding. Our audit objective was to determine whether the City (1) expended its CDBG disaster recovery grant funds for property acquisitions in accordance with Federal regulations, and (2) complied with all contract procurement regulations.

The City generally expended its CDBG disaster recovery grant funds for property acquisitions in accordance with applicable Federal regulations. However, it did not ensure a competitive procurement process and did not properly execute its CDBG Disaster Recovery-funded contracts. It (1) did not adequately advertise requests for proposals for its two professional services contracts, (2) did not establish cost reasonableness of two contracts totaling more than $12.2 million, (3) executed one contract before obtaining city council authorization, and (4) did not include all required provisions in the contracts. The City lacked detailed operational procedures, including checklists, to ensure it adhered to applicable procurement regulations.

We recommend that the U.S. Department of Housing and Urban Development work with the State of Iowa to ensure that the City (1) develops and implements detailed operational procedures that fully implement its procurement policy and complies with its ordinances, (2) justifies more than $9.3 million in spent funds or reimburses the unsupported amount to the program, (3) justifies more than $2.8 million in unspent funds, or cancel the use of unsupported funds, and (4) modifies the contracts to include all the required contract provisions.