We audited the City of Hawthorne because of a corrective action verification audit done by the Office of Inspector General (OIG) that identified $840,741 in HOME Investment Partnerships Program funds that were transferred to the Section 8 program between 2005 and 2006 (2013-LA-0802).  The objectives of the audit were to determine (1) the eligibility of $840,741 in 2005 and 2006 HOME program transfers to the Section 8 program, (2) whether the funds were repaid to the HOME program, (3) what activities the City informed the U.S. Department of Housing and Urban Development’s (HUD) Office of Community Planning and Development would be performed with the funds, and (4) how HOME funds were used in later years.

The City used nearly $1.6 million of its 2004 and 2005 HOME funds for ineligible activities, which were not repaid to the HOME program.  The City informed HUD’s Office of Community Planning and Development that it would use the funds for various items, including a HOME tenant-based rental program; however, it used its HOME funds to cover shortfalls in Section 8 rental assistance payments.   Although no HOME funds were used for the Section 8 program in later years, the City had not developed written policies and procedures for its HOME program.

We recommend that the Director of HUD’s Los Angeles Office of Community Planning and Development require the City to (1) repay the HOME program account nearly $1.6 million for ineligible HOME funds that were used for Section 8 housing assistance payments and (2) develop and implement written policies and procedures for the HOME program.