We completed an audit of the City of Jersey City's (City) capacity to administer Community Development Block Grant (CDBG) funding provided under the American Recovery and Reinvestment Act of 2009 (Recovery Act). Our objectives were to evaluate the City’s capacity in the areas of internal controls, eligibility, financial controls, procurement, and output/outcomes in administering CDBG funds.

The City generally had adequate financial controls and staff capacity to administer its CDBG funds; however, it needs to strengthen its controls to ensure that it will be able to effectively administer CDBG funds provided under the Recovery Act (CDBG-R) and comply with applicable requirements. Specifically, the City did not ensure that costs charged to CDBG planning and administration by its subgrantee were reasonable and necessary, and have adequate procedures to ensure compliance with procurement requirements.

We recommend that the Director of HUD’s New Jersey Office of Community Planning and Development instruct the City to strengthen its controls and (1) repay $61,718 in ineligible costs charged to CDBG planning and administration, (2) support the allocability of $117,721 in planning and administration costs charged to the CDBG program,and (3) ensure that procurements are conducted in accordance with all Federal requirements.