We completed a capacity review of the City of Fresno’s (City) Neighborhood Stabilization Program (Program). We performed the audit because Housing and Economic Recovery Act of 2008 reviews are part of the Office of the Inspector General’s annual audit plan and the program was identified as high risk. In addition, the City was awarded a $10.9 grant. Our objective was to determine whether the City had sufficient capacity and the necessary controls to manage and administer the Program. We determined that the City has sufficient management controls to ensure that grant funds are used for eligible purposes and disbursements are fully supported. However, it may not be capable of obligating program funds for eligible activities within 18 months, as required. It took the City more than seven months from receipt of the grant and four months from selection of subcontractors/developers to execute contracts with the four entities it selected to carry out program activities. Further, the program requires grantees to set aside 25 percent of grant funds to benefit individuals and families that earn no more than 50 percent of area median income. As of the end of November 2009, the City had not developed an action plan, nor had it selected a subgrantee for this activity. We recommend that the Director of the San Francisco Office of Community Planning and Development provide the City with technical assistance and HUD oversight to ensure that program funds are obligated within 18 months.