The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited the City of East St. Louis, Illinois’ (City) Community Development Block Grant (Block Grant) program. Our objective was to determine whether the City properly managed Block Grant-funded housing rehabilitation contracts.

We found that the City awarded more than $1 million in Block Grant funds for 124 of the 147 rehabilitation contracts reviewed without adequately ensuring that it complied with requirements and that the work was completed in an acceptable manner. Specifically, it did not ensure that contractors completed all of the contracted work as required and at a reasonable cost. Additionally, the City created scopes of work for the rehabilitation contracts that were not detailed and specific in nature. Finally, it did not comply with Federal procurement requirements and its own policies and procedures when it managed the rehabilitation contracts.

We recommended that HUD withhold $400,000 in 2010 Block Grant funding for the City’s housing rehabilitation programs until it improves its controls and require the City to collect more than $127,000 paid to contractors for rehabilitation work not performed or improperly performed. Additionally, we recommended that HUD require the City to develop and implement adequate internal controls to ensure that all work is completed according to the scope of work, update its inspection software, and provide training to ensure future compliance.