We conducted an audit of the City of Long Beach because it was awarded more than $22.2 million in Recovery and Reinvestment Act of 2009 Neighborhood Stabilization Program 2 (NSP2) funds on February 11, 2010 as the lead agency in a consortium with Habitat for Humanity of Greater Los Angeles (Habitat), making it one of the largest NSP2 fund recipients in the Los Angeles area. Our objective was to determine whether the City of Long Beach administered its NSP2 grant in accordance with Federal regulations.

We found no problems with the $5.5 million the City provided to Habitat, used to purchase and redevelop abandoned or foreclosed-upon homes. However, the City did not fully comply with Federal regulations when administering its NSP2 second mortgage assistance activities. Specifically, it did not (1) obtain the 1-percent market rate purchase discount on non-real-estate-owned properties and (2) have all properties appraised within 60 days of the final offer. Therefore, we recommend that the Director of the Los Angeles Office of Community Planning and Development require the City to reimburse the NSP2 program $84,110 from non-Federal funds, and implement procedures and controls to ensure that its appraisals meet program timeframe requirements.